Former Obama Official is Tasked With Trying To Save Fantasy Sports

Amid a crack­down from state reg­u­lat­ors and un­der the mi­cro­scope in Wash­ing­ton, the fantasy-sports in­dustry is adding a high-pro­file law­yer to its roster to try to show it can be trus­ted to po­lice it­self.

The trade group rep­res­ent­ing fantasy sports an­nounced Wed­nes­day that it will cre­ate an in­de­pend­ent self-reg­u­lat­ing agency. The Fantasy Sports Con­trol Agency will be headed by Seth Har­ris, a former deputy Labor De­part­ment sec­ret­ary un­der Pres­id­ent Obama who led the de­part­ment on an act­ing basis for a year.

The in­de­pend­ent agency, housed un­der the Fantasy Sports Trade As­so­ci­ation, is meant to de­vel­op stand­ards to de­ter il­leg­al and un­eth­ic­al be­ha­vi­or in the fantasy-sports in­dustry and set up audit­ing and en­force­ment pro­ced­ures. That’s a way to head off scru­tiny from fed­er­al and state of­fi­cials fol­low­ing some high-pro­file scan­dals.

But it’s also a sign that fantasy sports is no longer just a part-time dis­trac­tion for sports nerds—it’s now a massive in­dustry that has to play the Wash­ing­ton game.

“There’s a wide re­cog­ni­tion that the in­dustry has grown up and really changed,” Har­ris told Na­tion­al Journ­al. “There are now bil­lions of dol­lars in rev­en­ue, tens of mil­lions of play­ers on­line, and busi­ness part­ners that are ma­jor sports leagues and high-pro­file me­dia com­pan­ies. There’s a re­cog­ni­tion by in­vestors and by the com­pan­ies that the in­dustry needs to start tak­ing re­spons­ib­il­ity.”

Har­ris said the new agency would im­pose some or­der on the in­dustry, such as crack­ing down on al­leg­a­tions of in­sider trad­ing and en­sur­ing that play­ers are of leg­al age and not ab­us­ing the sys­tem.

Its cre­ation also comes at a per­il­ous time for the fantasy in­dustry. Sites such as DraftK­ings and Fan­Duel, where users pay to par­ti­cip­ate in a cash prize con­test on a daily or weekly basis rather than over the course of a sea­son, are sud­denly boom­ing and at­tract­ing the eye of the gov­ern­ment. Demo­crats on the House En­ergy and Com­merce Com­mit­tee, in­clud­ing rank­ing mem­ber Frank Pal­lone of New Jer­sey, have called for a hear­ing on the sites, char­ging that they’re akin to gambling and should be sub­ject to more reg­u­la­tion.

Earli­er this month, Nevada barred daily fantasy, say­ing that it was gambling and re­quired a li­cense to op­er­ate in the state. The Mas­sachu­setts Gam­ing Com­mis­sion is set to con­sider the is­sue as well this week, join­ing oth­er states, such as Illinois, that are re­view­ing the in­dustry. The Justice De­part­ment and the New York at­tor­ney gen­er­al have also opened up an in­vest­ig­a­tion in­to the sites after it was re­vealed that a DraftK­ings em­ploy­ee with ac­cess to the site’s data had won $350,000 on the com­pet­ing site Fan­Duel (the site claims the em­ploy­ee did not have ac­cess to the in­form­a­tion while play­ing on Fan­Duel).

In re­sponse, the in­dustry has star­ted staff­ing up in Wash­ing­ton. Fan­Duel has hired the lob­by­ing firm Step­toe & John­son to rep­res­ent them, and DraftK­ings is re­tain­ing the law firm Green­berg Traurig LLP. DraftK­ings has also hired Martha Coakley, the former Mas­sachu­setts at­tor­ney gen­er­al and gubernat­ori­al can­did­ate, as an ad­viser.

Pal­lone said that it was already clear the fantasy-sports in­dustry is “un­able to self-reg­u­late.”

“Now, the idea that a so-called ‘in­de­pend­ent au­thor­ity’ in its in­fancy would com­pel this multi-bil­lion dol­lar in­dustry to self-po­lice is not only un­real­ist­ic, it falls far short of the over­sight needed to en­sure that daily fantasy sites are fair and trans­par­ent,” Pal­lone said.

So is an in­dustry-backed, self-poli­cing sys­tem just a way to get the gov­ern­ment off its case?

“I view elec­ted of­fi­cials and reg­u­lat­ors as stake­hold­ers,” Har­ris said. “I hope they’ll par­ti­cip­ate to es­tab­lish a really ro­bust sys­tem.”

“I’ve been in gov­ern­ment,” he ad­ded. “The gov­ern­ment has very starkly lim­ited re­sources; nobody has all the re­sources they need to get the job done. If the in­dustry can suc­cess­fully pre­vent and pree­mpt this kind of con­duct, the hope is that the gov­ern­ment can in­vest its lim­ited re­sources in­to oth­er mat­ters.”

Har­ris said the body would set stand­ards to pre­vent “un­eth­ic­al or il­leg­al or ir­re­spons­ible con­duct,” while also cre­at­ing a sys­tem to cer­ti­fy com­pan­ies that com­ply. The body would ap­ply stand­ards to both daily fantasy sites and tra­di­tion­al fantasy-sports out­lets that run for full sea­sons.

The FSTA said it will also re­tain an ac­count­ing firm to mon­it­or and audit the board.

Har­ris comes backed with cre­den­tials that lend some le­git­im­acy to the in­dustry’s re­sponse. He served as deputy Labor sec­ret­ary from 2009-2014, tak­ing over the de­part­ment in 2013 after the resig­na­tion of Sec­ret­ary Hilda Sol­is. After leav­ing the Obama ad­min­is­tra­tion in 2014, Har­ris took a po­s­i­tion with the Cor­nell Uni­versity School of In­dus­tri­al and Labor Re­la­tions. He also served as a coun­sel at Dentons, a firm that has rep­res­en­ted the Fantasy Sports Trade As­so­ci­ation.

For all of his Wash­ing­ton cre­den­tials, there is one item on Har­ris’ re­sume that he thinks makes him “truly in­de­pend­ent”—he’s nev­er played the games he’s go­ing to be reg­u­lat­ing.

“I’m a sports fan, mostly bas­ket­ball, but I’ve nev­er played a fantasy-sports game,” he said. “I’ve talked to people and I can see why people en­joy it, es­pe­cially in my kids’ gen­er­a­tion. It’s ex­cit­ing. But no, I’ve nev­er been in­volved.”