Before sports betting can start in NC, a fight to define fantasy contests

By Brian Murphy, WRAL

North Carolina lawmakers legalized mobile sports betting in the state in June, ending a long political debate over expanded gambling.

But they left regulation of the industry to the North Carolina Education Lottery Commission, thus beginning a new debate over the rules surrounding sports betting.

The lottery commission's first set of proposed rules has ignited a fight over what is a fantasy contest, what is sports betting, which companies can offer which games and who, exactly, has the authority to make that determination.

What are fantasy sports?

Most fantasy sports players participate in season-long fantasy leagues. For football, you have a draft or an auction. You have a weekly matchup. You either make the playoffs or miss them, hoping to earn bragging rights over your college friends or your co-workers and, perhaps, a small payout.

Some play daily fantasy contests. For football, it works like this: You pick a lineup that stays under a salary cap with star players costing more than secondary players. Many teams can have some of the same players. Your lineup scores points for the day or the week, just like in season-long leagues, and you finish in the money or out. The next week, you can pick a whole new lineup or not play at all. A devastating injury won't sink your chances for the entire season.

In recent years, a new model has emerged where fantasy players can pick whether several real-world athletes will reach or fail to reach certain statistical achievements in a given game or day. Will Patrick Mahomes throw over or under 300 yards? Will LeBron James have over or under 25 points? Combine several of those together and you have these daily fantasy pick 'em contests. The fantasy player is competing against the house, not another player.

The fight over defining 'fantasy contests'

Representatives from online pick 'em contest operators testified Friday morning at a lottery commission public hearing that the commission is overstepping its authority in proposing rules to narrow the definition of fantasy sports contests further than is done in state statute.

"The legislature could have easily adopted the exact same language that the proposed rules have in them and it chose not to do that," said Nicholas Green, the general counsel at Underdog Fantasy.

"And it chose not to do that knowing full well what the fantasy sports landscape in North Carolina was on the day of passage, in which our company and other companies like ours had been operating for years and offering fantasy contests."

This debate is playing out in other states as well, including Colorado. Several states that have legalized sports wagering do not allow the contests under fantasy sports.

A final decision on the proposed rules in North Carolina is expected Nov. 16. These types of fantasy games have been legal in North Carolina.

"We have hundreds of thousands of customers in this state," said Tom Lee, an attorney representing Prize Picks. "This proposed rule says to those North Carolinians, you’re doing something wrong, you’re doing something that you should not be allowed to do and this commission intends to stop it."

No one from the commission spoke at Friday's hearing. Sterl Carpenter, the lottery's deputy executive director of gaming compliance and sports betting, attended the hearing. He did not speak to reporters after it.

"We are pleased that stakeholders have utilized the opportunity to participate in the process," said Van Denton, the lottery's director of communications, in a statement. "The Commission will take those comments under advisement as it moves to finalize and adopt its rules. The General Assembly tasked the Commission with ensuring compliance with the sports wagering law and implementing protections and safeguards for the people of North Carolina. The Commission takes these responsibilities seriously and its rules will reflect its dedication to providing safe betting options for the public."

Sports betting in North Carolina can begin as soon as Jan. 8 or as late as June 15 under state law.

Proposed rule on fantasy contests

North Carolina's sports wagering law (General Statute 18C-902) says "nothing in this Article shall apply to fantasy or simulated games or contests in which one or more fantasy contest players compete and winning outcomes reflect the relative knowledge and skill of the fantasy contest players and are determined predominantly by accumulated statistical results of the performance of individuals, including athletes in the case of sporting events."

The proposed rule from the lottery commission further defines "fantasy contests" by saying they do not include any of the following contests:

(a) based on proposition wagering or contests that involve, result in, or have the effect of mimicking proposition wagering or other forms of Sports Wagering;

(b) in which an Individual chooses, directly or indirectly, whether individuals or a single real-world team will surpass an identified statistical achievement, such as points scored;

(c) in which an Individual submits a fantasy contest team which does not involve the knowledge, skill, input, or control of such person;

(d) in which an Individual submits a fantasy contest team composed of: (i) a single individual; (ii) the entire roster of a real-world team; or (iii)solely individuals who are members of the same real-world team; or

(e) in which an Individual fantasy Player does not compete against at least one other Individual fantasy Player.

Opponents of the proposed rule said it goes too far and that a fight over the definition of fantasy contests was part of the law-making process.

"There was tremendous jockeying among stakeholders as to the definition of fantasy contests," Green said. "In fact there were a number of fantasy operators and future sports operators who sought a definition that would prohibit many of the contests like the ones that our company offers including our very popular pick ’em contest. The legislature expressly rejected those efforts.

"The proposed rules reflect a wish list of those folks who are on the other side in the legislative process."

If the pick 'em contests were prohibited, bettors could make similar wagers through sports wagering operators. On those sites, they are called proposition bets -- will a player achieve a certain statistical milestone? -- and when combined together they are called a parlay.

Green, with Underdog Fantasy, said it intends to acquire one of 12 sports wagering operators licenses in the state. Prize Picks does not.

North Carolina state Rep. Jason Saine, R-Lincoln, was the chief architect of the sports wagering law. He said it was not the lawmakers' intent to ban fantasy pick 'em contests.

"As author of the bill, I wasn't trying to eliminate anybody," Saine told WRAL on Friday. "That sounds, to me, like heavy lobbying by those opposed."