Still, most states do make a distinction – and at times, Ohio DFS operators have tiptoed over to the very edge of what clearly is sports betting.
That’s what has caught the eye of Ohio Casino Control Commission regulators. At their recent monthly meeting, executive director Matt Schuler noted that,
“In every part of gaming that we regulate, there are always challenges with skill games. It’s illegal casinos masquerading as ‘games of skill.’”
So why don’t DFS operators simply apply for licenses as sportsbooks? Cost is a key factor, as DFS licenses in Ohio come with a price of $3,000 to $30,000 (varying based on how large the customer base is).
A sportsbook license, meanwhile, comes at a minimum price of $1 million in Ohio.
Another issue is age: those 18-20 can legally play DFS in Ohio, but they cannot legally place a sports bet.
DFS Operators vs. Sportsbooks
The five companies under scrutiny are offering “fantasy contests” that look an awful lot like “prop bets” – that is, risking money on whether a particular player’s results come out above or below a certain yardage level in football, for example.
While sportsbooks are best known for offering team sports bets against a point spread or a money line, they also offer prop bets as well.
“They offer proposition wagers, which are part of sports gaming, against the house, but they trying to call them fantasy contests,” Schuler said of the DFS companies under investigation.
Ohio regulators have earned national notoriety since sports betting became legal in the state on Jan. 1, 2023, for their efforts to deter what they see as encroachments on the state’s gambling law.
For instance, DraftKings had to shell out $500,000 earlier this year for multiple violations that included directly mailing promotional material to underage Ohio residents, not including mandatory problem gambling language in its advertising, and misleadingly offering “free bets” that did not comply with state gambling law.
Barstool Sports, meanwhile, was forced to pay a $250,000 fine for advertising its pending sportsbook launch at an event on the University of Toledo campus in November, even though many of the students there are under age 21.
“Once something becomes illegal, the illegal folks that want to masquerade in some fashion seem to come at this like, ‘Well, you have casino gaming, so why would you worry about my little strip-mall casino?” Schuler said at the meeting. “You already have sports gaming, so why would you care about my little fantasy contest operation that’s offering head-to-head plays against the house?’”
“Well, we do because the law says we do, and we follow the letter of the law.”
The commission has sent out numerous “cease-and-desist” letters to DFS operators in the state, Schuler said, but there is more work to be done.
The Five Targets of Regulators
PredictionStrike, Fliff, Lucra Sports, Dynasty Owner, and TeamStake are the current targets, according to the Legal Sports Reports website.
In January 2023, the New Jersey Division of Gaming Enforcement Deputy Director Louis Rogacki wrote a letter to PredictionStrike detailing its conclusion that the company’s selling of shares in the future performance of athletes via an “initial public offering” was not permitted.
“As the ‘share price’ offered to the public depends upon the performance of individual athletes, particularly in the IPO process, the Division finds that the services offered by PredictionStrike are online sports wagering as defined by [New Jersey law]. Accordingly, PredictionStrike may engage in such activity in New Jersey only if it holds the requisite license.
“PredictionStrike does not hold a sports wagering license; nor is it eligible to apply for such license as it is not a New Jersey casino or racetrack. At this time, PredictionStrike does not hold a casino service industry enterprise license or transactional waiver, and it does not have the requisite partnership with a sports wagering licensee. PredictionStrike’s Chief Executive Officer Deven Hurt has not been found qualified.”
“Therefore, the Division has determined that PredictionStrike is likely engaged in illegally offering gambling in New Jersey, and every day it continues to do so is an ongoing violation of New Jersey law.”
The company no longer does business in that state.
Fliff, meanwhile, is the target of a class-action lawsuit in California for its “free-to-play” sweepstakes games which, in reality, appear to mirror sportsbook offerings.
To make things even more daunting for the five companies under fire, none of them reportedly even have a DFS license in the state.
If there was any doubt about the resolve of Ohio regulators on such issues, the revocation of StatHero’s fantasy sports license in November should provide clarity.
In that case, StateHero offered “against the house” contests in violation of state law that any DFS contests be held among various entrants. StatHero agreed to a settlement that ended its presence in Ohio.