Fantasy sports operators crowd growing Maryland market

Nearly a dozen daily fantasy sports operators have registered to do business in Maryland, crowding the field in a state that has not clarified its intentions on a pastime whose popularity among sports fans has grown dramatically in recent years.

The Office of the Maryland Attorney General has opined that daily fantasy — in which players seek payouts based on the performance of actual professional athletes — is close enough to gambling that it might require the approval of voters in a ballot referendum.

But the General Assembly has shown little interest in setting a referendum. So Comptroller Peter Franchot issued the state’s first-ever regulations to guide the multi-billion dollar industry’s operations here.

Those rules, which took effect in January, appear to have emboldened operators to sign up. The landscape includes the industry giants FanDuel and DraftKings and several smaller operators, according to records obtained under a Public Information Act request.

“Marylanders from all regions participate in daily online fantasy sports,” Franchot said in a statement in response to a Baltimore Sun query. “We have put these regulations in place to try to help ensure these games are fair, played on an even playing field and that the appropriate taxes are paid.”

The other operators that have registered to do business in the state are Eaglestrike, Yahoo Fantasy Sports, DataForce Fantasy Football, Fanamana, RealTime Fantasy Sports, For Players By Players and Fantasy Draft.

In fantasy games, participants pay to draft actual players in football, baseball and other sports and then accumulate points based on their statistical performances. Since star players are popular selections, winners are often those who deviate from the pack by picking less-heralded players in favorable matchups.

Eaglestrike, which launched in Virginia last year, has adopted a novel strategy for claiming a share of the Maryland market. Eaglestrike players register for fantasy competitions in football, NASCAR and other sports not on their phones but on terminals in bars and pool halls around Maryland.

The black terminals resemble ATMs with colorful touch screens. The company has installed single terminals at each of 10 locations in the state, including bars in White Marsh, Pasadena, Crofton, Mount Airy and College Park.

“The model is inherently different,” said Adam Flore, a consultant for Eaglestrike. “Users don’t have to worry about playing against tremendously sophisticated players.”

Entry fees are $10, in cash only. Top prizes are relatively modest — typically $350 to $700 — and selecting lineups is less complicated than in most games offered by larger operators.

At bars such as the Tilted Kilt at White Marsh or Tuggie’s in Pasadena, Flore said, his best customers are often “guys who come in and drink Miller Lite.”

Sometimes the bartenders play, too. Bars may run closed contests for their own customers, instead of making the games available to players in other states. Winners might get a $100 gift certificate.

Eaglestrike declined to say how it is faring financially. Flore said it has registered more than 3,500 players in seven states and is approaching $400,000 in prizes paid.

“We’re not knocking on the door of FanDuel, but our players are happy,” he said.

Franchot’s regulations restricted most players' maximum monthly spending to $1,000, and barred players from using the sophisticated computer programs called scripts that enable fans to enter — and quickly adjust — hundreds of lineups instantaneously to give them an advantage over casual competitors.

More than 57 million people in the United States and Canada play fantasy sports, according to an Ipsos survey commissioned by the Fantasy Sports Trade Association.

The industry says it has more than 200,000 participants in Maryland. But the largest operators, DraftKings and FanDuel, declined to specify how many Marylanders play their games.

The companies believe the state’s regulations are working “quite well,” said Marc La Vorgna, a spokesman for both.

The explosion of daily fantasy sites led state Senate President Thomas V. Mike Miller to ask the state attorney general's office in 2015 for advice.

Assistant Attorney General Kathryn Rowe and Adam D. Snyder, chief counsel for opinions and advice, wrote that daily fantasy might not be legal because it had not been approved by voters in a statewide referendum. That’s how the state got casinos, and later expanded them.

Attorney General Brian E. Frosh recommended last year that the General Assembly clarify the legal status of daily fantasy. Miller and others introduced legislation to set a referendum, but the proposal did not pass.

Franchot, in his words, stepped “into the breach.”

That was the sign that Eaglestrike needed.

“We were aware of the attorney general's opinion,” Flore said. The company “would have not commenced operations in Maryland if the comptroller [had not] promulgated regulations.”

If the General Assembly ultimately weighed in, Flore said, “I would expect any piece of legislation to include thoughtful player protections and operator regulations much like the comptroller's current rules, but not make daily fantasy sports illegal.”

Matt Saler is vice president of sports marketing for the Baltimore advertising and marketing firm IMRE. By keeping fans engaged, he said, fantasy football “has played a very big role in helping the NFL reach the heights it has.”

“I don’t think fantasy is going anywhere anytime soon.”

Bob Dorfman, executive creative director at Baker Street Advertising in San Francisco, said fantasy football has been particularly important to the NFL this year because “it seems the games are less interesting.

“There are too many injuries and bad matchups.” he said. “But if you've got a fantasy team going, you've got other reasons to watch.”

Many of the companies operating in Maryland had been doing business in the state before the regulations were finalized. The comptroller’s office said the regulations don’t apply to “beer and chips” leagues, often set up and run among friends or work colleagues, in which little cash changes hands.

Maryland’s initial fantasy sports law, in 2012, was meant mostly to address those small-scale, season-long games. Maryland modeled its fantasy sports law after federal legislation. The state law, which exempts fantasy competitions from other gambling prohibitions, says fantasy games reflect “the relative skill of the participants.”

Sites such as FanDuel and DraftKings — targets of Franchot’s regulations — allow customers to pick new rosters after a day's play. The potential to win — or lose — money is maximized.

A Sparrows Point man claimed $300,000 on DraftKings in 2015.

A spokeswoman for Frosh said his office would make no further recommendation on fantasy sports.

“The opinion and last year’s recommendation are already known,” spokeswoman Raquel Guillory Coombs said.

The issue doesn’t appear to be a priority for legislators heading into the 2018 session.

“I don’t think it’s on the radar,” said Del. Eric Luedtke, a Montgomery County Democrat and former co-chairman of the joint gaming committee. “The comptroller’s regulations are reasonable and they’re working.”

But some legislators might seek to legalize sports betting at Maryland’s six casinos. Federal law bars sports betting — in which wagers are made on the outcome of games — in Maryland and most other states, but the Supreme Court is expected to rule next year on a challenge to the ban.

Legalizing sports betting in Maryland would require the approval of voters.

“I think there will be bills introduced and we will need to have a discussion about them,” Luedtke said.

Since the smaller operators can’t compete with FanDuel and Draft Kings on prize money, Eaglestrike, DataForce and others try to appeal to fans’ desire for camaraderie.

DataForce offers only season-long contests. The company claims several thousand players in many states.

“We’re kind of a throwback,” Lee Harmon said. The software developer founded DataForce three years ago in Lino Lakes, Minn.

“It’s an entirely different atmosphere when you’re working with season-long and you have a commissioner,” Harmon said. “That commissioner is working with every one of the players in the league and is accessible if they have questions about a trade or a dispute between players.”

Smaller operators can struggle, Harmon said, under the costs of paying accountants, lawyers and licensing fees.

“We’re surviving,” Harmon said, “but the smaller, season-long sites are dropping like flies.”

Virginia charges a $50,000 licensing fee to fantasy operators, and Pennsylvania recently approved a $50,000 fee.

The comptroller’s office said it studied other states and decided not to assess operators a fee.

“Maryland is a breeze,” Harmon said. “We love you guys.”

Jason Bang has an Eaglestrike terminal at his Saphire Cafe in Bethesda.

“It’s a good thing to have at the bar because it interacts with a lot of people,” he said.

Season-long leagues, which existed before daily fantasy, remain popular among Ravens fans.

Santana Gordon said he entered a few contests, including a $20-per-person Yahoo competition with colleagues, at the beginning of the season.

Gordon, a loan officer from York, Pa ., said it helps him learn more about football. But it occasionally pains him to select a player who is a Ravens rival.

“Being a Baltimore fan, you don’t want to root for a Steeler or Patriot,” he said. “But when it comes to fantasy football you have to adjust.”

jebarker@baltsun.com

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UPDATES:

11:15 a.m., Nov. 30: This story has been updated to remove incorrect information about the companies registered with the state as fantasy sports operators. Eclipse Compliance Testing is not among them.

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