New Jersey’s attorney general has levied the state’s first-ever civil penalty against a company for operating an unlicensed fantasy-sports website in the state, signaling the Murphy administration’s intent to aggressively enforce regulations that were enacted just a few years ago.
As part of a broader settlement, Minnesota-based SportsHub, which operates several online fantasy sports games in New Jersey, was fined $30,000. The company was also required to clearly disclose to consumers that personal information may be shared with third parties, and to offer consumers an opportunity to request that their information not be shared, according to the Attorney General’s Office.
Among the allegations the state lodged against SportsHub was that the company operated in New Jersey without obtaining a license between February 2018 and September 2018.
The state also alleged that SportsHub — which operates such games as “Fanball,” “CDM Sports,” “National Fantasy Football Championships,” “Whatif Sports,” and “Leaguesafe” — did not “conspicuously disclose” that it could collect personal information from its consumers’ social-media accounts and share the information with third parties conducting research studies.
In addition to paying the civil penalty, SportsHub agreed as part of a consent order to revise its privacy policies, terms and conditions, and several other practices in order to continue operating in New Jersey.
Just in time for football season
The state’s action was announced late last month, just before the start of the latest National Football League season; the first 2019-2020 game will be played tonight in Chicago.
New Jersey began regulating online fantasy sports games in 2017 under a law that, among other things, requires companies to secure a license in order to operate here.
“New Jersey’s fantasy-sports law offers fans an opportunity to fully immerse themselves in the sports they love, while ensuring a safe and enjoyable experience for all who participate,” said Attorney General Gurbir Grewal. “As the (SportsHub) settlement … illustrates, New Jersey enforces the laws in place to ensure transparency and protect consumers from hidden threats to their online privacy.”
Reached for comment yesterday, a SportsHub official emphasized that the company is now in “good standing with New Jersey.”
Invented decades-ago by sports-statistics enthusiasts, fantasy-sports games generally involve the tracking of the statistical performance of a group of players selected by a virtual “general manager,” with different formats allowing for competitions that can last from one day to season-long.
Daily fantasy games have taken off
In recent years, websites like DraftKings and FanDuel have begun to popularize several types of daily fantasy games. The online format has allowed the pool of potential daily-fantasy general managers — or players — who compete against one another to expand dramatically, compared with the more traditional seasonal leagues that are played primarily for bragging rights among family, friends and coworkers who, before the internet, would keep track of stats using newspapers and other sources. Online players typically pay only a few dollars to join a daily fantasy contest, with money deposited into an account administered by the game’s operator. But prizes for the top-performing individual players in the biggest games can rise into the millions, making the nationwide contests lucrative for both the website operators and the winning players.
After daily fantasy games took off in popularity and became a significant national industry, questions were raised about whether they were being properly regulated under existing state and federal law. New Jersey responded by enacting a law in 2017 that required operators to follow a series of formal regulations and to also pay for an operating permit. That law came roughly a year before the state legalized and began regulating sports-betting on team sports, including online sports betting.
New Jersey’s fantasy-sports law defined a large-scale fantasy sports activity subject to state regulation as a “contest with an entry fee in which a participant owns or manages an imaginary team and competes against other participants or a target score for a predetermined prize with the outcome reflecting the relative skill of the participants and determined by statistics generated based on performance by actual individuals participating in actual competitions or athletic events.”
The law also established financial guidelines that, among other things, required the companies to conduct audits and maintain monetary reserves, and it allowed them to partner with state-based casinos and racetracks. It also prohibited players under 18 and banned the offering of any fantasy games linked to high-school sports.
Licensing began early in 2018
Website operators were given until February 2018 to obtain a license from the state. Nonpartisan analysts from the Office of Legislative Services estimated New Jersey residents spend hundreds of millions annually on fantasy sports, and that the new law could generate more than $6 million in annual income for the state. It’s unclear how much annual revenue the law has helped to generate since it was enacted.
“We are pleased that SportsHub has obtained the necessary permits to do business in New Jersey and has agreed to abide by all our laws and regulations going forward,” said Paul R. Rodríguez, acting director of the Division of Consumer Affairs.
“As the fantasy-sports industry continues to grow in New Jersey, we will closely monitor the activities to ensure that all operators are playing by rules,” he said.