[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]





             DAILY FANTASY SPORTS: ISSUES AND PERSPECTIVES

=======================================================================

                                HEARING

                               BEFORE THE

           SUBCOMMITTEE ON COMMERCE, MANUFACTURING, AND TRADE

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 11, 2016

                               __________

                           Serial No. 114-144


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]










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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman
JOE BARTON, Texas                    FRANK PALLONE, Jr., New Jersey
  Chairman Emeritus                    Ranking Member
ED WHITFIELD, Kentucky               BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
JOSEPH R. PITTS, Pennsylvania        ELIOT L. ENGEL, New York
GREG WALDEN, Oregon                  GENE GREEN, Texas
TIM MURPHY, Pennsylvania             DIANA DeGETTE, Colorado
MICHAEL C. BURGESS, Texas            LOIS CAPPS, California
MARSHA BLACKBURN, Tennessee          MICHAEL F. DOYLE, Pennsylvania
  Vice Chairman                      JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana             G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio                DORIS O. MATSUI, California
CATHY McMORRIS RODGERS, Washington   KATHY CASTOR, Florida
GREGG HARPER, Mississippi            JOHN P. SARBANES, Maryland
LEONARD LANCE, New Jersey            JERRY McNERNEY, California
BRETT GUTHRIE, Kentucky              PETER WELCH, Vermont
PETE OLSON, Texas                    BEN RAY LUJAN, New Mexico
DAVID B. McKINLEY, West Virginia     PAUL TONKO, New York
MIKE POMPEO, Kansas                  JOHN A. YARMUTH, Kentucky
ADAM KINZINGER, Illinois             YVETTE D. CLARKE, New York
H. MORGAN GRIFFITH, Virginia         DAVID LOEBSACK, Iowa
GUS M. BILIRAKIS, Florida            KURT SCHRADER, Oregon
BILL JOHNSON, Missouri               JOSEPH P. KENNEDY, III, 
BILLY LONG, Missouri                     Massachusetts
RENEE L. ELLMERS, North Carolina     TONY CARDENAS, California
LARRY BUCSHON, Indiana
BILL FLORES, Texas
SUSAN W. BROOKS, Indiana
MARKWAYNE MULLIN, Oklahoma
RICHARD HUDSON, North Carolina
CHRIS COLLINS, New York
KEVIN CRAMER, North Dakota
           Subcommittee on Commerce, Manufacturing, and Trade

                       MICHAEL C. BURGESS, Texas
                                 Chairman
                                     JANICE D. SCHAKOWSKY, Illinois
LEONARD LANCE, New Jersey              Ranking Member
  Vice Chairman                      YVETTE D. CLARKE, New York
MARSHA BLACKBURN, Tennessee          JOSEPH P. KENNEDY, III, 
GREGG HARPER, Mississippi                Massachusetts
BRETT GUTHRIE, Kentucky              TONY CARDENAS, California
PETE OLSON, Texas                    BOBBY L. RUSH, Illinois
MIKE POMPEO, Kansas                  G.K. BUTTERFIELD, North Carolina
ADAM KINZINGER, Illinois             PETER WELCH, Vermont
GUS M. BILIRAKIS, Florida            FRANK PALLONE, Jr., New Jersey (ex 
SUSAN W. BROOKS, Indiana                 officio)
MARKWAYNE MULLIN, Oklahoma
FRED UPTON, Michigan (ex officio)
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, opening statement..............................     1
    Prepared statement...........................................     2
Hon. Janice D. Schakowsky, a Representative in Congress from the 
  State of Illinois, opening statement...........................     3
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, opening statement....................................     5
    Prepared statement...........................................     5
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................     6

                               Witnesses

Peter Schoenke, President, Rotowire, On Behalf of Fantasy Sports 
  Trade Association..............................................     8
    Prepared statement...........................................    11
    Answers to submitted questions...............................   110
John M. McManus, Executive Vice President, General Counsel, and 
  Secretary, MGM Resorts International...........................    15
    Prepared statement...........................................    17
Steve Brubaker, Executive Director, Small Business of Fantasy 
  Sports Trade Association.......................................    19
    Prepared statement...........................................    21
    Answers to submitted questions...............................   121
Ryan Rodenberg, Assistant Professor, Florida State University, 
  Department of Sport Management.................................    30
    Prepared statement...........................................    32
    Answers to submitted questions...............................   124
Mark Locke, Chief Executive Officer, Genius Sports Group.........    45
    Prepared statement...........................................    46
Lindsay Slader, Operations Manager, GeoComply....................    47
    Prepared statement...........................................    49
Jordan Gnat, SVP, Strategic Business Development, Scientific 
  Games..........................................................    53
    Prepared statement...........................................    55
Kurt Eggert, Professor of Law, Chapman University Fowler School 
  of Law.........................................................    60
    Prepared statement \1\.......................................    61
    Answers to submitted questions \2\

                           Submitted material

Statement of the American Gaming Association.....................    79
Statement of the Mellman Group...................................    83
Statement of the Stop Predatory Gambling group...................    86
Statement of the National Conference of State Legislators........    94
Statement of the Attorney General from the State of Texas........   101

----------
\1\ The prepared statement of Mr. Eggert can be found at: http://
  docs.house.gov/meetings/if/if17/20160511/104902/hhrg-114-if17-
  wstate-eggertk-20160511.pdf.
\2\ Mr. Eggert did not respond to questions for the record.

 
             DAILY FANTASY SPORTS: ISSUES AND PERSPECTIVES

                              ----------                              


                        WEDNESDAY, MAY 11, 2016

                  House of Representatives,
Subcommittee on Commerce, Manufacturing, and Trade,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:16 a.m., in 
room 2123, Rayburn House Office Building, Hon. Michael C. 
Burgess, M.D., (chairman of the subcommittee) presiding.
    Present: Representatives Burgess, Lance, Harper, Guthrie, 
Bilirakis, Brooks, Mullin, Upton (ex officio), Schakowsky, 
Clarke, Kennedy, Cardenas, Butterfield, Welch, and Pallone (ex 
officio).
    Staff Present: Mike Bloomquist, Deputy Staff Director; 
Leighton Brown, Deputy Press Secretary; Rebecca Card, Assistant 
Press Secretary; Paige Decker, Executive Assistant; Graham 
Dufault, Counsel, Commerce, Manufacturing and Trade; Melissa 
Froelich Counsel, Commerce, Manufacturing and Trade; Giulia 
Giannangeli, Legislative Clerk, Commerce, Manufacturing and 
Trade; Jay Gulshen, Staff Assistant; Paul Nagle, Chief Counsel, 
Commerce, Manufacturing and Trade; Tim Pataki, Professional 
Staff Member; Mark Ratner, Policy Advisor to the Chairman; Dan 
Schneider, Press Secretary; Olivia Trusty, Professional Staff 
Member, Commerce, Manufacturing and Trade; Dylan Vorbach, 
Deputy Press Secretary; Michelle Ash, Minority Chief Counsel, 
Commerce, Manufacturing and Trade; Jeff Carroll, Minority Staff 
Director; Lisa Goldman, Minority Counsel, Commerce, 
Manufacturing and Trade; Tiffany Guarascio, Minority Deputy 
Staff Director and Chief Health Advisor; Rick Kessler, Minority 
Senior Advisor and Staff Director, Energy and Environment; Dan 
Miller, Minority Staff Assistant; Caroline Paris-Behr, Minority 
Policy Analyst; Tim Robinson, Minority Chief Counsel; Andrew 
Souvall, Minority Director of Communications, Outreach and 
Member Services; and Matt Schumacher, Minority Press Assistant.

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE 
              IN CONGRESS FROM THE STATE OF TEXAS

    Mr. Burgess. I want to thank all of our witnesses for being 
here today. I ask everyone to take their seats. The 
subcommittee on Commerce, Manufacturing and Trade will now come 
to order. The chair recognizes himself 5 minutes for the 
purpose of an opening statement.
    Once again, I would say to you good morning and welcome to 
our hearing on daily fantasy sports. At the outset, I would 
like to thank the ranking member of the full committee, 
Representative Pallone, for his letter last fall requesting the 
hearing. The panel of witnesses here today will discuss the 
issues facing daily fantasy sports, the industry, as well as 
consumer protection features that are available in the 
marketplace.
    There have been headlines, there have been advertisements, 
and over the last year we have all seen the introduction of 
these contests to fans. Some of these contests can be played 
for pennies while others are for substantial amounts of money. 
Just as the proliferation of the Internet and mobile devices 
have given consumers access to personalized entertainment on 
the go, like Netflix, Words With Friends, and Candy Crush, they 
have also supported the growth of the fantasy sports contests.
    Between 1994 and 2003, the number of fantasy sports players 
increased from around 2 million players to 15 million players. 
In 2015, almost 60 million people played fantasy sports.
    As fun and easy as the games are advertised to be, the 
issues involved are actually complicated, more complicated than 
they might first appear. This hearing is an opportunity for the 
stakeholders to discuss the many aspects of this complicated 
issue. Consumer protection is a critical component of this 
conversation, and indeed it is a critical component of the work 
that this subcommittee does day in and day out. Not only should 
consumers have a clear understanding of the rules and the risks 
for a particular contest, but the integrity of the game depends 
upon consumers getting what they are paying for.
    There has been a significant amount of state activity in 
this area in the last few months. I am interested in hearing 
from the witnesses how state regulatory responses have impacted 
their industry and their marketplace. From the states that have 
required the daily fantasy sports sites to meet online gambling 
requirements, to the states that have passed legislation 
explicitly legalizing fantasy games, it is critical to 
understand the role of the states and what impact their actions 
have on interstate commerce.
    Consistently during this term of the subcommittee, I have 
focused on the struggles that small businesses face in the 
regulatory environment. I believe that small businesses are 
vital to our economy, and understanding how they fit into this 
industry, that is reportedly dominated by a few large actors, 
is a critical piece of this puzzle.
    Once again, thank you to our witnesses for participating 
this morning.
    And I would yield back my time and recognize the ranking 
member of the subcommittee, Ms. Schakowsky, 5 minutes for an 
opening statement, please.
    [The prepared statement of Mr. Burgess follows:]

             Prepared statement of Hon. Michael C. Burgess

    Good morning. Welcome to our hearing on daily fantasy 
sports. At the outset, I would like to thank the Ranking Member 
of the full committee, Representative Pallone, for his fall 
letter requesting this hearing.
    The panel of witnesses here today will discuss the issues 
facing the daily fantasy sports industry as well as the 
consumer protection features available in the marketplace.
    There have been many headlines, and advertisements, over 
the last year introducing many fans to these new contests--some 
of which can be played for pennies while others are for 
substantial sums of money. Just as the proliferation of the 
Internet and mobile devices have given consumers access to 
personalized entertainment on the go like Netflix, Words with 
Friends, and Candy Crush, they have also supported the growth 
of fantasy sports contests.
    Between 1994 and 2003, the number of fantasy sports players 
jumped from around 2 million players to 15 million players. In 
2015, almost 60 million people played fantasy sports.
    As fun and easy as the games are advertised to be, the 
issues involved are actually more complicated then they might 
appear at first glance. This hearing is a prime opportunity for 
stakeholders to discuss the many aspects of this complicated 
issue.
    Consumer protection is a critical component of this 
conversation. Not only should consumers have a clear 
understanding of the rules and risks for a particular contest, 
but the integrity of the game depends on consumers getting what 
they paid for.
    There has been a significant amount of state activity in 
this area in the last few months. I am interested in hearing 
from the witnesses how the state regulatory responses have 
impacted the marketplace. Also, I have a letter from the 
Attorney General of my home state of Texas to include in the 
record.
    From the states that have required the daily fantasy sites 
to meet online gambling requirements, to the states that have 
passed legislation explicitly legalizing fantasy games--it is 
critical to understand the role of the states and what impact 
their actions have on interstate commerce.
    Consistently during my term as subcommittee Chairman, I 
have focused on the struggles small businesses face in the 
regulatory environment. I believe that small businesses are 
vital to our economy and understanding how they fit into this 
industry that is reportedly dominated by a few large actors is 
a critical piece of the puzzle.
    Thank you again to our witnesses for joining us this 
morning.

       OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A 
     REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

    Ms. Schakowsky. Thank you, Chairman Burgess, for holding 
today's hearing on daily fantasy sports. I want to welcome all 
of our witnesses today.
    Today's hearing really comes down to one question: what 
should be the future of this multi-billion-dollar gaming 
industry? Fantasy sports games competing for cash against 
others by picking fantasy teams of real sports players have 
taken off in recent years, and according to Fantasy Sports 
Trade Association, 56.8 million people in the United States and 
Canada participated in some form of fantasy sports in 2015. 
While this includes traditional fantasy that spans the entire 
football season or baseball season, a rapidly expanding share 
of spending goes to daily fantasy sports.
    Between 2012 and 2015, daily fantasy grew from less than 10 
percent of all fantasy sports spending to now more than half, 
and there is big money in this industry. Daily fantasy 
companies generate $3.7 billion in entry fees alone.
    When we talk about the daily fantasy industry, we are 
mainly talking about two companies. DraftKings and FanDuel 
represent 95 percent of the daily fantasy market. I would note, 
however, that neither of those companies is testifying today, 
neither are the sports leagues and teams that have partnered 
with these sites.
    Daily fantasy has gotten big fast, but how should we think 
of daily fantasy? Companies that operate these Web sites call 
daily fantasy a game of skill. I will admit it takes some 
skill. You have to pick players to be part of your fantasy 
team. I doubt I would be very good at that. I know I wouldn't. 
But even if some skill is required, daily fantasy at its core 
involves betting on sports. As hall of fame quarterback Joe 
Namath put it when asked by CNBC, ``Do you have anything''--
this is what Joe said. He said, ``Do you have to pay anything 
to play, and do they win something? It is gambling.''
    Several states have come to the same conclusion. Last year 
in my home State of Illinois, Attorney General Lisa Madigan 
declared daily fantasy to be illegal gambling under State law. 
The Illinois State legislature is considering legislation to 
make daily fantasy a regulated and taxed form of gaming under 
the oversight of the Illinois Gaming Board.
    On the Federal level, it almost seems like an accident that 
daily fantasy sites are allowed to exist in the first place. 
Sports betting is illegal in all but four grandfathered States 
under the Professional and Amateur Sports Protection Act, and 
the Unlawful Internet Gambling Enforcement Act generally 
prohibited online gambling. UIGEA contained an exception for 
fantasy supports. Keep in mind that in 2006 when UIGEA passed, 
fantasy sports was almost all season-long fantasy, not the 
daily fantasy sports that we are focusing on today.
    Even if daily fantasy companies claim to be legal under the 
letter of the law, that doesn't seem like the lawmakers' 
intent. Former Congressman Jim Leach, who introduced UIGEA, 
said last year that he had no idea that the fantasy exception 
would, quote, morph in today's cauldron of daily betting, 
unquote. He continued, quote, it is sheer chutzpa for the 
fantasy sports companies to cite the law as a legal basis for 
existing, unquote.
    As long as the Federal law on daily fantasy seems 
ambiguous, the legality of daily fantasy will be determined 
largely at the State level. Daily fantasy companies have 
responsibility to comply with these State regulations, blocking 
use in States where daily fantasy has been determined to be 
illegal gambling.
    If these sites are going to operate, daily fantasy 
companies need to take robust steps to prevent use by minors or 
those struggling with gambling addiction. Ensuring they take 
these steps will require appropriate regulation.
    So what should be the future of daily fantasy? Should it be 
allowed? Several States have already decided the answer is no. 
And if betting through daily fantasy is going to take place, 
what regulations need to be in place to protect consumers?
    I am disappointed that the companies most central to this 
discussion are not here today to answer these questions.
    That said, I welcome our witnesses and look forward to 
hearing your perspectives on this industry.
    And I yield back.
    Mr. Burgess. The gentlelady yields back. The chair thanks 
the gentlelady, recognizes the chairman of the full committee, 
Mr. Upton of Michigan, 5 minutes for an opening statement.

   OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Upton. Thank you, Mr. Chairman.
    So today we are going to hear from stakeholders about the 
daily fantasy sports industry that indeed has attracted so much 
attention and excitement in the last couple of years. Most 
folks' exposure to fantasy sports consist of a group of friends 
and coworkers getting together for a season-long pool. The 
games are a fun way to bring communities together, even 
Republicans and Democrats for sure, around some of our very 
favorite national pastimes, but what we have seen in the last 
couple years is the explosive growth of a new segment of the 
fantasy world, daily fantasy sports. About 60 million folks are 
playing fantasy sports and a reported 14 million are playing 
daily fantasy sports with sometimes millions of dollars at 
stake.
    So as we explore the current landscape of daily fantasy 
sports and the new innovations that they offer for fans, 
consumer protections have to be in place for players on the Web 
sites. It is clear that adult players deserve a fair game and 
clear rules.
    I look forward to hearing from the witnesses about what 
internal controls are in place to ensure game integrity on 
fantasy sports Web sites, particularly if different operators 
use different controls. I am also interested to learn about the 
self-regulatory activities industry has put in place and the 
technological tools available in the market to implement 
consumers protections, including age limits and geofencing.
    States all across the country are looking at these issues, 
which is going to help inform whether a Federal role is 
warranted or not. So my State, Michigan, there is a bill 
pending in the legislature to expressly legalize daily fantasy 
sports, but we must keep in mind that a patchwork of differing 
and contradictory state laws has the potential to negatively 
impact consumers and harm further growth and innovation in the 
process.
    Thank you all for being here today. I look forward to your 
testimony.
    And I yield back.
    [The prepared statement of Mr. Upton follows:]

                 Prepared statement of Hon. Fred Upton

    Good morning. Today we will hear from stakeholders about 
the daily fantasy sports industry that has attracted so much 
attention and excitement in the last year or two.
    Most people are familiar the fantasy sports that consist of 
a group of friends and coworkers getting together for a season 
long pool. These games are a fun way to bring together 
communities--even republicans and democrats--around some of our 
favorite national pastimes.
    What we've seen in the last few years is the growth of a 
new segment of the fantasy world: daily fantasy sports. Around 
60 million people are playing fantasy sports and a reported 14 
million are playing daily fantasy sports, with millions of 
dollars at stake.
    As we explore the current landscape of daily fantasy sports 
and the new innovations they offer for fans, I will be focusing 
on the consumer protections in place for players on DFS Web 
sites. It is clear that adult players deserve a fair game and 
clear rules. I am interested in hearing from the witnesses 
about what internal controls are in place to ensure game 
integrity on daily fantasy sports Web sites-particularly if 
different operators use different controls.
    I am also interested to learn about the self-regulatory 
activities industry has put in place and the technological 
tools available in the market to implement consumer protections 
include age limits and geofencing.
    States all across the country are looking at these issues, 
which will help inform whether a Federal role is warranted. In 
Michigan, for instance, there is a bill pending in the 
legislature to expressly legalize daily fantasy sports. \1\
    I would like to thank the witnesses for taking time to come 
help us understand this growing industry and I look forward to 
hearing your testimony.
---------------------------------------------------------------------------
    \1\ Id.

    Mr. Burgess. The chair thanks the gentleman. The gentleman 
yields back. The chair recognizes the gentleman from New 
Jersey, Mr. Pallone. 5 minutes for opening statement, please.

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. Thank you, Mr. Chairman.
    Daily fantasy sports have become an integral part of the 
game for millions of fans around the country. What started as 
small informal betting pools among friends over the course of a 
season is now a sophisticated online platform where millions of 
dollars are exchanged across state lines every day. Entry fees 
for daily fantasy sports range from a few cents to several 
thousand dollars, and the major daily fantasy sports operators 
have posted revenues of more than $1 billion in recent years.
    Casual fans and diehards alike have embraced daily fantasy 
sports as a way to interact with the games and players they 
enjoy, and the leagues have taken notice. Within the past 2 
years, Major League Baseball, the NBA, the NHL, and Major 
League Soccer have each purchased ownership stakes or invested 
in daily fantasy sports operators. Individual teams across 
professional sports have also formed lucrative partnerships 
with DFS operators, including nearly all NFL and MLB teams and 
about half of the NBA teams. These teams and their leagues know 
that daily fantasy sports participants watch more games than 
the average fan and will even watch a one-sided contest until 
the end if a player's performance could improve their stats and 
earn them money. For the leagues, this presents a massive 
ratings and advertising opportunity.
    And despite its growing popularity, however, daily fantasy 
sports are currently operating in a murky legal framework by an 
industry is that mostly unregulated. It is crucial that 
consumers know what they are purchasing when they sign up for 
daily fantasy sports and that they understand the risk of 
losing money in the process. For example, there are reports 
that 90 percent of payouts were won but just 1 percent of 
winners. With the allegations of insider trading at two major 
daily fantasy sports operators, the potential harm to consumers 
is real. And today we will explore not how to stop people from 
playing, but how to bring fairness and transparency to the 
industry.
    And I must also mention the hypocrisy of those arguing that 
daily fantasy sports is readily distinguishable from 
traditional sports betting. While quietly applying for and 
receiving gambling licenses in the United Kingdom, daily 
fantasy sports operators continue to argue to interested states 
in the United States that unlike sports betting, daily fantasy 
sports is not gambling. Their reliance on this arbitrary 
distinction of skill and chance is unconvincing, especially 
since both the Department of Justice and the NFL have asserted 
that sports betting also is a game of skill.
    And speaking of the professional sports leagues, they have 
reaped huge profits from their partnerships with daily fantasy 
sports operators, at the same time most remain stubbornly 
opposed to sports betting on the grounds that their players 
could become involved in gambling and organized crime if it 
were legalized, yet an estimated $400 billion is spent annually 
in the United States on sports betting, and 99 percent is 
illegal and functions almost exclusively through organized 
crime.
    In New Jersey, voters approved a two-to-one referendum in 
2011 to allow sports betting at casinos and race tracks. In 
response, every major professional sports league joined 
together and sued the state to stop the plan's implementation 
and stifle the will of the voters. How can the professional 
sports leagues oppose sports betting at casinos and race tracks 
but support and prosper from the betting that is taking place 
every day in daily fantasy sports?
    To date, the leagues and others have not sufficiently 
explained the difference between fantasy sports, sports 
betting, and other forms of gambling, and I look forward to 
hearing from the witnesses on this topic.
    I just want to conclude by thanking Chairman Upton and 
Burgess for holding this hearing at my request. While I am 
disappointed that some of the relevant actors in this place, 
like FanDuel and DraftKings, refused to participate today, I 
still believe that this hearing will be a good beginning to our 
efforts to level the playing field between daily fantasy 
sports, traditional sports betting, and gaming.
    And I yield back the balance of my time. Thank you, Mr. 
Chairman.
    Mr. Burgess. The chair thanks the gentleman. The gentleman 
yields back.
    This concludes member opening statements. The chair would 
like to remind members that pursuant to committee rules, all 
members' opening statements will be made part of the record.
    The chair also wants to acknowledge the presence of our 
colleague from Nevada, Ms. Titus, on the dais, who is not a 
member of the committee, but is monitoring our activities this 
morning to ensure that we behave ourselves.
    So we do want to thank our witnesses for being here this 
morning and taking their time to testify before the 
subcommittee. Today's witnesses will have the opportunity to 
summarize their opening statements, followed by a round of 
questions from members.
    Our witness panel for today's hearing includes Mr. Peter 
Schoenke from RotoWire; Mr. John McManus, the Executive Vice-
President and General Counsel and Secretary at MGM Resorts 
International; Mr. Steve Brubaker, Executive Director at Small 
Business of Fantasy Sports Association; Dr. Ryan Rodenberg, 
Assistant Professor at Florida State University within their 
Department of Sports Management; Mr. Mark Locke, Chief 
Executive Officer at Genius Sports Group; Ms. Lindsay Slader, 
Operations Manager at GeoComply. Where did we get to--Mr. 
Jordan Gnat, Senior Vice-President of Strategic Business 
Development at Scientific Games; Mr. Kurt Eggert, Professor of 
Law at Chapman University's Fowler School of Law.
    We do appreciate all of you being here this morning, and we 
will begin our panel with Mr. Schoenke. And you are now 
recognized for 5 minutes for your opening statement. Thank you.

STATEMENTS OF PETER SCHOENKE, PRESIDENT, ROTOWIRE, ON BEHALF OF 
 FANTASY SPORTS TRADE ASSOCIATION; JOHN M. MCMANUS, EXECUTIVE 
  VICE PRESIDENT, GENERAL COUNSEL, AND SECRETARY, MGM RESORTS 
   INTERNATIONAL; STEVE BRUBAKER, EXECUTIVE DIRECTOR, SMALL 
    BUSINESS OF FANTASY SPORTS TRADE ASSOCIATION; DR. RYAN 
   RODENBERG, ASSISTANT PROFESSOR, FLORIDA STATE UNIVERSITY, 
  DEPARTMENT OF SPORT MANAGEMENT; MARK LOCKE, CHIEF EXECUTIVE 
   OFFICER, GENIUS SPORTS GROUP; LINDSAY SLADER, OPERATIONS 
   MANAGER, GEOCOMPLY; JORDAN GNAT, SVP, STRATEGIC BUSINESS 
 DEVELOPMENT, SCIENTIFIC GAMES; AND KURT EGGERT, PROFESSOR OF 
          LAW, CHAPMAN UNIVERSITY FOWLER SCHOOL OF LAW

                  STATEMENT OF PETER SCHOENKE

    Mr. Schoenke. Chairman Burgess, Ranking Member Schakowsky, 
and members of the subcommittee, thank you for the opportunity 
to testify today.
    Mr. Burgess. Our technology here is arcane to ancient. You 
would think that while we are the premier technology committee 
in the United States, we would have only the best, but that is 
not true. So please continue.
    Mr. Schoenke. I will try to work through it.
    Chairman Burgess, Ranking Member Schakowsky, and members of 
the subcommittee, thank you for the opportunity to testify 
before you today. My name is Peter Schoenke and I am testifying 
as chairman of the Fantasy Sports Trade Association.
    The FSTA has over 300 members, including major media 
companies, such as ESPN, CBS, Yahoo, NBC, and Fox Sports; 
content and data providers like USA Today, RotoGrinders, and 
STATS, Inc.; and contest and league management operators, such 
as RealTime Fantasy Sports, MyFantasyLeague, FanDuel, and 
DraftKings.
    Fantasy sports have become a new national pastime, with 
over 50 million Americans participating in some form of fantasy 
sports last year. Americans enjoy fantasy sports as a hobby and 
as a form of entertainment that gives them an enhanced 
experience and a deeper appreciation for the sports they love.
    I am also the founder and president of RotoWire.com, a 
leading information Web site for fans who enjoy playing fantasy 
sports. I founded the Web site almost 20 years ago, when 
fantasy sports were just beginning to be played on the 
Internet. I am a small business owner based in Madison, 
Wisconsin, and I chose a career in this industry because I am 
passionate about playing fantasy sports and helping millions of 
others enjoy the hobby.
    First I would like to give a short introduction to fantasy 
sports. Although it may seem to some as if fantasy sports 
started last fall, with the barrage of ads during football 
season, the truth is that fantasy sports have been played for 
over 35 years. While there have been some innovations, like 
head-to-head contests, live scoring, and most recently the 
daily or weekly format, the basic concept has remained the 
same. The objective is for a player to select a team of real 
world athletes and compete against opponents based upon a 
scoring system that uses statistical measures of individual 
athlete's performances.
    Take fantasy football as an example. Players draft a team 
of eight real world football players from different teams to 
play positions like quarterback, running back, wide receiver, 
and so forth. The goal is to assemble a fantasy team that will 
earn the most points, not to pick the winner of any particular 
game. A running back, for example, earns 1 point for every 10 
rushing yards and 6 points for a touchdown. This format is 
typical for both season-long fantasy contests as well as daily.
    Some may have the impression that the daily format is 
dramatically different than season-long fantasy sports, but it 
is virtually identical in the way it assigns points for 
players' performance. All of the same basic principles apply. 
An owner still assembles a team of real word players from 
different teams for multiple positions, and those players earn 
points through the same scoring system as in the season-long 
leagues. The only difference is the duration of the contest. 
Rather than taking place over a 17-week football season before 
crowning a champion, for instance, these contests take place 
over a single day or weekend. In essence, every week is akin to 
the playoff rounds in a season-long league; think speed chess 
versus regular chess.
    Many sports observers recognize that fantasy sports are 
having a transformative effect on how fans enjoy sports. 
Ultimately this innovation can enhance fans' overall 
experience, to the benefit of all.
    My second point today is that the states are actively 
regulating our industry. We support commonsense state 
regulation to ensure transparency and fairness and to maintain 
consumer confidence. I want to emphasis that we are committed 
to consumer protection, not just because it is the right thing 
to do, but because it is vital to the health of our industry. 
States have traditionally taken the leading role in regulating 
these issues, and states have taken varying approaches in the 
context of fantasy sports. In the majority of states, paid 
fantasy sports operate under the existing legal framework 
without separate legislation or regulation, but bound by state 
laws on fair commercial practices.
    Some states, including Virginia, Indiana, and Tennessee, 
have enacted legislation to clarify the legality of paid 
fantasy sports contests and to ensure consumer protections. 
Other states are currently crafting legislation tailored to 
their own state's needs and interests.
    We stand ready to work with any state interested in 
developing a commonsense regulatory framework that would allow 
residents to play fantasy sports while ensuring appropriate 
consumer protections and without dampening innovation or 
denying consumer choice.
    Finally, at the Federal level, Congress has empowered the 
FTC to protect American consumers from unfair or deceptive acts 
or practices, and we as an industry appreciate that our 
businesses must comply with these standards just as all other 
Internet businesses do. We stand ready to work with the FTC and 
with this subcommittee in moving forward to ensure the fairness 
and transparency of paid daily fantasy sports as well as 
season-long fantasy sports, and to ensure that we maintain the 
trust and confidence of fans that choose to play fantasy 
sports.
    We also hope that in doing so, we preserve the ability of 
states to regulate this activity, and that they do so without 
killing the innovative spirit and new and exciting choices for 
millions of fans who enjoy fantasy sports.
    Thank you again for the opportunity to testify today. I 
look forward to answering any questions you may have.
    [The prepared statement of Mr. Schoenke follows:]
    
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    Mr. Burgess. The chair thanks the gentleman. The chair 
recognizes Mr. McManus for 5 minutes for your opening 
statement, please.

                  STATEMENT OF JOHN M. MCMANUS

    Mr. McManus. Thank you, Chairman Burgess, members of the 
subcommittee. I appreciate the opportunity to be here to 
testify today.
    I am the executive vice-president and general counsel for 
MGM Resorts. We operate land-based casinos throughout the 
United States. I note that many of the members of the 
subcommittee are from the states where we either operate a 
casino or may be developing one, so I will try to be on my best 
behavior today.
    I have submitted written testimony. I am going to just 
summarize it, as we have many more knowledgeable panelists on 
the subject today and I would like to allow additional time for 
your questions.
    And I don't speak for the land-based casino industry 
generally. There are different points of view with respect to 
daily fantasy sports. My company has its point of view, and I 
will speak really on behalf of my company, but I think where 
there are differences, I can address that through questions if 
you would like.
    Really, like most other people, I first became aware of 
daily fantasy sports through the barrage of television 
advertisements. And sort of the first impression I had is, what 
is this? And it sort of feels like gambling to me, was my 
initial reaction. And over the last year and a half or so, I 
have tried to study it, learn more about it.
    We are a gambling company, a gaming company, and we are a 
bookmaker in Nevada, the one state that has really full scale 
sports betting permitted under PASPA, so it is of great 
interest to us. And our first reaction was, well, maybe this is 
something we want to get involved with. We looked into it and 
concluded that as a regulated company, there was a lot of risk, 
because there wasn't clarity on whether it was legal, exactly 
what it was, and, frankly, we didn't know how to make money 
doing it as well.
    So through our study of the subject, we concluded that what 
we really need is to know whether or not it is legal, because 
whether we choose to engage in it directly, have marketing 
partnerships with the companies that do engage in it, or any 
other association, as a licensed gaming company, we need to 
associate ourselves with businesses that are legal, and avoid 
falling into situations where we are associated with an illegal 
operation.
    So we really want clarity, and that is one point I think 
the industry is unified on, that having legal clarity on the 
subject of daily fantasy is critical. And gaming and gambling 
issues have historically and, I think, appropriately been 
regulated at a state level and legislated at a state level. 
There are many states represented on this subcommittee where 
there is no legal casino gaming and there are others where it 
is an important industry and part of the economy in those 
states. We think that is where these decisions ought to lie, on 
gaming anyway, that that ought to be an issue to be decided by 
the states to preserve the differences of the citizens of the 
states and let them decide what type of activity will be 
permissible.
    However, to the extent that daily fantasy is or is not 
gambling, it ought to be run fairly with appropriate consumer 
protections and appropriate level of regulation, whether it is 
gaming regulation or otherwise. So we fully support consumers 
being able to engage in this activity, in a lawful and safe 
manner, and with appropriate protections. And we hope, whether 
it is at a Federal level or a state level, appropriate actions 
are taken to make sure that this is a safe playing field for 
those who enjoy it.
    We think it is a really interesting innovation. It is 
something that has activated fan bases for a variety of sports, 
and increased engagement. I know that the leagues, with the 
exception of the NCAA have embraced it. And it is something 
that we would like to see done in a safe and responsible 
manner.
    And with that, I will be happy to answer any questions.
    [The prepared statement of Mr. McManus follows:]
    
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    Mr. Burgess. The chair thanks the gentleman. The gentleman 
yields back. Mr. Brubaker, you are recognized for 5 minutes for 
your opening statement, please.

                  STATEMENT OF STEVE BRUBAKER

    Mr. Brubaker. Good morning, Chairman Burgess, Ranking 
Members Schakowsky and Pallone. My name is Steve Brubaker. And 
I am here representing the small businesses of fantasy sports.
    I think, like many of you, I didn't know there were small 
businesses of fantasy sports until about 6 weeks ago. I was 
contacted by a mutual friend that had some fantasy football, 
season-long fantasy football clients that were disappointed in 
some legislative activity that happened in Virginia and 
Indiana. I got in touch with these folks. We decided that we 
needed to educate legislators, now we have an opportunity to 
educate Members of Congress, about the needs of small 
businesses in this industry and how they differ from the large 
companies.
    And we are concerned that, I think you mentioned, Chairman 
Burgess, this patchwork of laws across the country. We are 
concerned about this patchwork. It is hard work for a small 
group of companies to band together and try to work on 
legislation in 50 states at the same time. We are trying, we 
are making that effort, and we are going to continue on as long 
as we can do that.
    On the two states that we had problems with early on, 
Virginia and Indiana, the issues for the small companies are 
really financial and regulatory. So we had a $50,000 annual fee 
in both those states. None of the small companies make $50,000 
in those states. So if you are not making $50,000 and the fee 
is $50,000, you are barred from entry into that state, so 
financially we can't operate there.
    Mr. Schoenke mentioned Tennessee. Tennessee has a 6 percent 
tax on net revenues. It is not a horrible, large tax, it is 
higher than we want to see it in that state, but the undefined 
portion of that is the regulatory fees. We don't know what they 
are going to be. We have to go negotiate those.
    We are looking for clarity in laws. We would like to have 
low fees everywhere we go, low taxes if there is going to be 
taxes, but it is the regulatory burden that is really 
troublesome. So what I mean by that is many of the state laws 
that we have seen on the books, or are introduced so far, talk 
about annual audits by a third party within the state. If we 
had an annual audit for our companies, one audit for the 
company that would be reciprocally accepted across all 50 
states, that would be certainly acceptable, that makes sense. 
You want to see our financials, here is our audited financials, 
here they go, all 50 states go out in the mail, but if we have 
to have audits in every single state, 50 states times that 
$4,000 or $5,000, $6,000, $10,000 fee, that is a prohibitive 
thing for us on the regulatory side.
    On scale, we talk about DraftKings and FanDuel, huge, huge, 
huge companies. Some of these companies that are in the small 
businesses of fantasy sports group may only have 4,000, 5,000 
players all across the country, so it is a different thing. It 
is like McDonald's compared to the local java hut you go to to 
get your morning coffee, or a Starbucks or something like that.
    But I think critically what we want to try to get across is 
we want to work with you. If you are interested in doing some 
more research on this, we will come here and talk to you at 
length about the needs of small businesses. Certainly we are 
going to keep plugging away in the states. We are working in 
Illinois really hard on that bill, Congresswoman Schakowsky. It 
is coming along. We will see how it progresses. New York has a 
tough bill. They have a $500,000 fee, a registration fee, in 
that state. I don't even know if DraftKings could have afforded 
that fee, although I think they supported that bill.
    So there is a lot of work that we have to do to educate 
people about the number of businesses, the types of businesses.
    A lot of our members are season-long. There is a drastic 
difference between season-long and daily. And most of that 
difference comes down to the active management that you have to 
have when you are a season-long fantasy sports player. You have 
to readjust your lineup every week for 16 weeks of a football 
season, thousands of transactions where you go back and forth 
improving your team so you can beat your buddy who is also in 
that same league with you.
    You don't have that in DFS. You pick your lineup, you 
select it, you might enter it in one or 100 different games for 
that day, and then you are done. Season-long, you are 
constantly working on that team, because, as I said, you want 
to beat your friends that are playing those games with you.
    I am running out of time here. I want to thank you for the 
opportunity of being here today.
    [The prepared statement of Mr. Brubaker follows:]
    
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    Mr. Burgess. The chair thanks the gentleman. The gentleman 
yields back. The chair recognizes Dr. Rodenberg. 5 minutes for 
your opening statement, please.

                 STATEMENT OF RYAN M. RODENBERG

    Mr. Rodenberg. Good morning, Dr. Chairman Burgess and other 
honorable members of the Subcommittee on Commerce, 
Manufacturing, and Trade. My name is Ryan Rodenberg. I work as 
a professor----
    Mr. Burgess. Sir, is your microphone on?
    Mr. Pallone. Closer.
    Mr. Rodenberg. Good morning, Dr. Chairman Burgess and other 
honorable members of the subcommittee on Commerce, 
Manufacturing, and Trade. My name is Ryan Rodenberg. I work as 
a professor at Florida State University. One of my primary 
research lines pertains to sports gaming. I am pleased to be 
invited to testify at today's hearing and appreciate the 
opportunity to be on this panel. My written statement and oral 
testimony reflect only my personal views and do not necessarily 
reflect the views of my employer or any of the media outlets 
for whom I have written articles.
    As I detail in my written statement, daily fantasy sports' 
current legal status lies at the intersection of three 
overlapping regulatory circles in a Venn diagram: Federal 
gaming law, state gaming law, and general notions of consumer 
protection.
    Given the overlap, and recognizing the daily fantasy sports 
represents only a small portion of the American sports gaming 
market, I believe any substantive discussion of daily fantasy 
sports must take place in the context of a simultaneous 
examination of traditional sports wagering.
    In this brief oral testimony, I focus on the most important 
Federal statute in this realm, the Professional and Amateur 
Sports Protection Act of 1992, or PASPA, for short. Justice 
John Paul Stevens, writing for a unanimous U.S. Supreme Court 
in a 1999 decision opined that, ``PASPA includes a variety of 
exemptions, some with obscured congressional purposes.''
    Similarly, the Department of Justice raised a number of 
concerns about PASPA in a September 1991 letter to then Senator 
Joe Biden.
    The paradoxical nature of PASPA's grandfathering scheme 
among the states has serious implications for potential 
consumer-protection-related regulations of daily fantasy sports 
as well as traditional sports gambling.
    Over the course of nearly 5 years of litigation, three 
Federal lawsuits against two different sitting state governors, 
and three Court of Appeals decisions with a fourth decision 
imminent, here is what we know about PASPA. First, for 
grandfathered states such as Nevada, Delaware, Montana, Oregon, 
and perhaps a few others, PASPA seemingly freezes in time, 
circa 1992, those states' abilities to enact sports gaming 
related regulations.
    Second, for nongrandfathered states, PASPA seemingly 
provides such states with the option of either retaining their 
sports gambling prohibitions as is or repealing their 
prohibitions entirely. To do otherwise would apparently render 
PASPA unconstitutional under the Tenth Amendment. Whether any 
middle ground is permitted under PASPA remains a subject of 
still ongoing litigation filed by the NCAA, NBA, NFL, NHL, and 
Major League Baseball against the Governor of New Jersey.
    Third, for all states, whether grandfathered under PASPA or 
not, the plain language of PASPA constrains the ability of 
governments to enact commonsense consumer protection 
legislation for both daily fantasy sports and traditional 
sports wagering. No Federal court case has squarely decided 
whether daily fantasy sports constitute illegal gambling. 
Relatedly, a Department of Justice attorney testified before 
Congress in 2000 and said, ``there is considerable debate we 
found in our research over whether or not fantasy sports 
leagues constitute gambling or whether they are simply a 
contest.''
    For all these reasons, I think it would be difficult for 
Congress to address specific issues pertaining to daily fantasy 
sports absent a contemporaneous evaluation of traditional 
sports wagering.
    Thank you, Chairman Burgess and members of the 
subcommittee, for the opportunity to appear before you today. I 
am happy to answer any questions you may have.
    [The prepared statement of Mr. Rodenberg follows:]
    
    
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      Mr. Burgess. The chair thanks the gentleman. Mr. Locke, you 
are recognized. 5 minutes for your opening statement, please.

                    STATEMENT OF MARK LOCKE

    Mr. Locke. Good morning. Many thanks to the committee for 
giving me the opportunity to speak today and share my 
experiences and views in relation to sports integrity. My name 
is Mark Locke. I am the chief executive officer of Genius 
Sports. We are a U.K.-based technology company that, among 
other things, specialize in providing technology and education 
services to sport in order to help them both protect the 
integrity of their events and also to help them understand the 
markets and the environment within which they operate.
    As I see it, my role here today is to share my experience 
and knowledge of factors that can influence the integrity of 
sport. At no point during today's sessions will any views I 
have be those other than my own, and I am certainly not 
speaking on behalf of or representing in any way the views of 
our partners or clients both here in the U.S. or 
internationally.
    Genius Sports was established as a technology company in 
the year 2000, and we have been operating in the regulated 
international gaming, sports, and lottery markets, providing 
various technical solutions that, amongst other things, enable 
us to collect data, model how events should be expected to 
proceed, and monitor betting markets on a live and automated 
basis. As a result of this work in technology, we are able to 
help sports to recognize anomalies that could indicate 
potential problems with the integrity of their events.
    As sports become more widely appreciated and 
internationalized, there has been an increasing need to have an 
education and technology services available to provide sports 
leagues and federations with the necessary breadth of knowledge 
and expertise in order to help them to manage in a safe and 
responsible fashion the growth of their events. We work across 
all sports, from technology, to education, helping these sports 
to achieve those goals.
    I hope that my experience and knowledge will be helpful to 
the committee today. And once again, many thanks for giving me 
the honor of participating.
    [The prepared statement of Mr. Locke follows:]
    
    
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    Mr. Burgess. The chair thanks the gentleman. The chair 
recognizes Ms. Slader. 5 minutes for your opening statement, 
please.

                  STATEMENT OF LINDSAY SLADER

    Ms. Slader. And I think that there is a map coming up on 
the screen here. Perfect.
    Thank you, Chairman Burgess and members of the subcommittee 
for having me here today. My name is Lindsay Slader. I am the 
operations manager of GeoComply, who is a geolocation 
technology provider.
    We have all heard of the Internet of things. The term used 
to describe how the Internet has gone from a desktop computer 
at home or the office to the near ubiquitous network of 
connected devices today. From phones in our cars, to our TV, 
everything is connected. However, with the Internet of things 
has also come the need for the Internet of places. States' 
rights concerns, as well as the requirement for national 
sovereignty over what can and can't be accessed on a 
territorial basis, have given rise to the need to determine 
with a very high degree of certainty what jurisdiction an 
Internet-connected consumer is governed by.
    Historically the notion that you could indeed draw 
geographic boundaries on the Internet would have been 
laughable, such was the weakness of the original technologies 
and the availability of cheap and easy methods to fake your 
location. However, with the advent of regulated iGaming in the 
U.S. in 2013, four of the five U.S. states who are 
participating meaningfully in iGaming today have taken the 
initiative in deploying stringent geolocation and security 
protocols in order to geofence their services solely within 
their boundaries. By doing so, they act with the clear letter 
and spirit of the Federal law of UIGEA, which requires such 
rigorous geolocation tools as a prerequisite of operating 
within a particular jurisdiction.
    Given the more recent rise of daily fantasy sports, the 
need to define physical location on the Internet has only 
become more significant. No matter how, nor in what manner, 
such an industry may be regulated, there is now advanced 
geolocation technology available to powerfully filter consumer 
access in any shape or form that may be required.
    Be it to promote or restrict online access, technology is 
no longer an impediment to a chosen business or legislative 
model. It can be an indispensable tool and enabler.
    GeoComply's technology is currently in action throughout 
the U.S., processing up to 1 million transactions per day. Our 
technology ensures state rights are respected through adequate 
geofencing and business operators are equipped with advanced 
tools needed to uphold relevant business and compliance 
requirements.
    For Internet gaming and lottery, we are currently working 
with licensed operators to uphold State regulations and the 
geographic borders of New Jersey, Nevada, Delaware, and 
Georgia. This also means not only enabling eligible traffic 
from these states, but also blocking traffic from states that 
outlaw Internet gaming, such as Utah, California, New York, and 
so on.
    For DFS, our geolocation solutions are designed to be 
highly adaptive to the constantly changing landscape of the DFS 
industry thus far. Given the volume and speed at which state 
DFS legislation is currently evolving, our systems are designed 
to turn on or off access at the drop of a hat for any 
particular state or region. I believe last week, for example, 
legislative changes were seen in about three states, whereas 
tomorrow, there could be a whole host of others.
    By providing the means to respect sovereignty and the 
jurisdictional powers of a given physical territory, all via 
the Internet, geolocation technology, therefore, provides a 
necessary two-fold function: one, to uphold the preferences and 
rights of any given jurisdiction seeking to enable yet contain 
user access within their borders; and, two, to respect the 
wishes of any jurisdictions that choose to not participate or 
license such activity or that may ban it all together.
    Neither can be achieved without adequately robust and 
adaptive geolocation tools. So if a state doesn't want it, they 
don't have to have it. Every use case has a technical solution.
    To perform a geolocation, GeoComply is able to gather 
pinpoint-accurate location data from a number of data sources 
to determine the whereabouts of a user. Then we confirm the 
integrity of that data to ensure it is secure and hasn't been 
masked or tampered with by any host of tools, such as proxies, 
VPNs, remote desktop software, jailbroken devices, mock 
location settings, and atomizers, the list goes on.
    By the time we approve or deny a transaction, the data may 
have gone through up to 350 checks that our compliance 
algorithm seeks to verify. These settings can be set and 
adjusted by regulators and operators, depending on the market 
needs and requirements. Therefore, it should be well noted that 
the technology and safeguards which may be necessary if state 
or Federal parties choose to become more involved in DFS, in 
some shape or form, are very capable and, in fact, quite robust 
to uphold such standards.
    GeoComply believes that all legislative and regulatory 
issues can easily be addressed with effective geofencing 
technology.
    If I can point your attention toward the map up on the 
screen.
    So as you can see on the map here, these are live 
geolocation queries and instant analytics currently happening 
in realtime in the U.S. In particular, this demonstrates the 
importance of pinpoint-accurate location data, given the 
significant population centers in America that line your state 
and Federal borders. And this technology can be custom 
configured and adapted accordingly to any given use case be it 
DFS or Internet gaming or any other industry.
    And then just a quick video clip. This is a zoom-in on the 
New Jersey-New York border, which is really a significant area 
for all the stakeholders speaking here today, be it gaming or 
DFS. This shows that not only can we accurately pinpoint 
someone's location, but also defend any given border even from 
the banks of the Hudson River in such a highly densely 
populated area.
    That concludes my testimony. Thank you for having me.
    [The prepared statement of Ms. Slader follows:]
    
    
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    Mr. Burgess. The chair thanks the gentlelady. The chair 
recognizes Mr. Gnat. 5 minutes for your opening statement, 
please.

                    STATEMENT OF JORDAN GNAT

    Mr. Gnat. Thank you, Chairman Burgess, Ranking Member 
Schakowsky, Ranking Member Pallone, and members of the 
subcommittee, for the opportunity to testify before you today.
    My name is Jordan Gnat and I am the senior vice-president 
of strategic business development for Scientific Games 
Corporation. Scientific Games is a leading innovator in the 
regulated global lottery, gaming, and interactive industries 
offering a range of products, technologies, and services to 
more than 300 customers on six continents for the last 40 
years. Scientific Games is also the service provider to the 
Delaware Lottery of its legal, regulated sports betting 
offering at over 100 retailers and three race tracks.
    I am honored to be with you today to share my observations 
from my 12 plus years in the international gaming industry. I 
would like to offer some insights regarding the means by which 
other countries have successfully implemented regulated sports 
wagering systems.
    My testimony will outline two case studies from Ontario, 
Canada, and the EU to help illustrate how these best practices, 
from geolocation and age verification, to betting limits, 
realtime global monitoring of betting activity, and education 
have been enabled effective and transparent sports wagering in 
international jurisdictions.
    Additionally, in almost all cases, these regulatory systems 
have enabled both governmental lotteries and commercial gaming 
operators to offer innovative products through multiple, highly 
regulated, licensed distribution channels. In fact, nine of the 
top ten legal sports betting jurisdictions in the world offer 
sports wagering either exclusively through their lottery or a 
combination of lottery and commercial operators, being land-
based or Internet.
    Let's begin with Canada. Legal sports wagering has been 
available in Canada since the early 1990s. Each of the five 
provincial lottery corporations in Canada offer a full line of 
sports betting, but in the form of parlay wagering, meaning 
that a wager placed must be on the outcome of more than one 
event, activity, or performance.
    To provide you with an example of how legal, secure, 
regulated sports betting happens in Canada, I will use the 
Province of Ontario as a case study. Ontario launched Pro-Line 
in 1994, and it is available at the nearly 10,000 licensed 
lottery retailers in the province. The first product launch was 
a simple three game parlay with a minimum and maximum betting 
limit set. Over the past 20 plus years, the product offerings 
have continued to evolve in sophistication to include two-event 
parlays, proposition wagering, and cross event wagering. The 
product has also evolved from a lottery-only channel to now 
include the casino channel. Recognizing the differences between 
the two, Ontario created a differentiated model for lottery 
retailers. With betting maximums for players at $100 and 
casinos, with betting maximums for players at $1,000. For its 
Internet activity, Ontario is soon to offer its sports betting 
products online alongside its current casino and lottery 
products.
    British Columbia, for example, offers a full range of 
Internet sports betting products. Both provinces use 
geolocation and age verification systems to ensure that players 
are of age and located specifically in BC or Ontario.
    I will now turn to Europe. The majority of jurisdictions in 
Europe offer sports wagering through their lottery or a 
combination of lottery and commercial operators. Each 
jurisdiction establishes its own betting rules, risk management 
teams, policies, odd setting frameworks, or outsources it to 
professional organizations.
    In 2012, the World Lottery Association introduced the 
Global Lottery Monitoring System, GLMS. The system went live in 
partnership with Sportradar in June 2015. GLMS provides its 
members alerts on betting anomalies from around the world. Each 
member reacts to the alert independently, looking at the 
betting in their particular market, and determines what 
corrective action is necessary, including voiding bets, and 
reporting to the appropriate authorities.
    There are 27 global members of GLMS from Europe, Canada, 
South America, Asia, and Africa. The program is planned to be 
expanded in the latter part of 2016.
    In addition to technological advancements, professional 
sports organizations themselves are beginning to introduce 
measures to ensure game integrity. As an example, in 2013, 
FIFA, FIFPro, and Interpol came together to announce a new 
initiative to combat match fixing in the form of a training 
program called ``Don't Fix It.'' The program focused on 
raising, quote, awareness of the dangers of match fixing among 
players, referees, officials, administrators, organizations, 
and public authorities, and to raise the ability of those 
involved in professional soccer to know how to recognize it, 
reject it, and report it.
    It is estimated that the illegal U.S. sports betting market 
could be as much as $400 billion. To put this number into 
perspective, the legal, regulated global lottery business is 
approximately $280 billion and the U.S. casino industry is 
approximately $240 billion.
    The point to understand here is that sports betting is 
already an enormous market in the U.S. Implementation of 
regulations that ensure integrity, accountability, and consumer 
safeguards in sports wagering can turn the current multi-
billion-dollar black market into a transparent, effective 
system that keeps professional sports and amateur sports safe 
for future generations.
    Mr. Chairman and Ranking Member Schakowsky, I again want to 
thank you and your members of this committee for inviting me to 
testify before you today at this very important hearing.
    I hope my presentation has provided helpful insights on 
some key elements of successful regulatory systems employed 
around the globe, and I look forward to the opportunity to 
answer your or our colleagues' questions. Thank you.
    [The prepared statement of Mr. Gnat follows:]
    
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    Mr. Burgess. The chair thanks the gentleman. Mr. Eggert, 
you are recognized. 5 minutes for opening statement, please.

                    STATEMENT OF KURT EGGERT

    Mr. Eggert. Thank you, Chairman Burgess and Ranking Members 
Schakowsky and Pallone. I appreciate the chance to talk about 
daily fantasy sports. I am a law professor. This is my third 
time testifying in front of this subcommittee about Internet 
gambling issues. And I must be doing something right, or you 
wouldn't keep inviting me back. At least that is my hope.
    I should say up front, I don't oppose or support daily 
fantasy sports or gambling. My purpose is to argue that if it 
is legalized, it needs to be regulated so that there is proper 
consumer protection, to maximize the experience of players, and 
to protect them from being cheated or beaten unfairly, and also 
to make sure that problem gamers get the help they need so that 
gambling and daily fantasy sports don't destroy the players and 
their families.
    One issue that constantly comes up is, is it gambling or 
not? Is this a game of skill or a game of chance? And I would 
like to say that for the people who are really good at it, it 
is not a game of skill, it is not a game of chance, it is a 
game of algorithms.
    The top players are, as far as I could tell, I have read a 
lot of interviews of the big winners, they are not long-time 
sports experts. Many of them I have seen come up through either 
poker or data management. And what they do is they construct 
these very sophisticated algorithms and import a huge amount of 
data, much more data than any human could hold in their brain 
at one time, and use these algorithms to spit out lineups, and 
then they can take these lineups and enter them into multiple, 
multiple, many times different competitions, both high stakes, 
mid stakes, low stakes.
    And so you can be just an average recreational gamer and 
suddenly be playing head to head with one of the top daily 
fantasy sports gamers in the world and perhaps not even 
recognize it. That would be as if you are out there playing 
tennis and suddenly Roger Federer is slamming balls at you, and 
you are playing for money.
    The last two times I testified, I talked about Internet 
poker, and the big issue there are BOTs. And the Internet poker 
industry says, it is wrong to use these algorithms to beat 
human players, and they claim that they can stop it. I am not 
sure they can, but at least they are trying.
    In daily fantasy sports, as far as I can tell, they don't 
even try to stop algorithms; instead, welcome the 
professionals, who gamble a lot of money every day, against 
people without these algorithms. So they have a huge advantage, 
not because they know more about sports, but because they have 
more data and have algorithms that can use that data to select 
the best portfolio of teams.
    I would like to ask industry representatives to explain, 
why is this a good thing to have a few top players take all 
this money from the many recreational players who are just 
trying to have a good time?
    So let's look at what these algorithms can do. They can 
track, say in baseball, for a hitter, they can track whether 
the hitter is good against lefties or righties or against this 
particular pitcher, they can track what direction the wind is 
likely to blow on a given day, they can track when will the sun 
be in the batter's eyes. I listened to one person who just won 
a competition, and he said, we were tracking the strike zone of 
the umpire. How many average players can import that kind of 
knowledge and make use of it? But the professionals can.
    So what do you do to help the recreational player? I think 
you need strong consumer protection. You need to limit the 
amount of lineups that people can enter, because people who are 
entering a lot of lineups are either pros or people probably 
with a problem. You also need to label the high earners so that 
the average player knows, look, I am going against somebody way 
out of my league, and can either choose to play or not.
    You also need services for problem gamers. You need them to 
know that they can get help if they need it. You need to 
prevent insider playing. And you also need regulators to 
oversee the games to make sure that people get paid and that 
the right people get paid.
    So with that, I am done. I appreciate you inviting me back. 
And I am happy to answer your questions.
    [The prepared statement of Mr. Eggert can be found at: 
http://docs.house.gov/meetings/if/if17/20160511/104902/hhrg-
114-if17-wstate-eggertk-20160511.pdf.]
    Mr. Burgess. Well, thank you. And thanks to all of our 
witnesses for their testimony.
    And we will move now into the question and answer portion 
of the hearing for member questions. I will begin the 
questioning by recognizing myself for 5 minutes.
    And, again, let me just say, fascinating amount of 
information you have provided for us this morning.
    Perhaps if I could, Mr. Eggert, let me just ask you before 
we leave your algorithm concept, and Ms. Slader, I want to 
include you in this question, because you heard Chairman Upton 
talk about how do you exclude someone who is underage, OK, from 
involving themselves in these daily fantasy sports.
    You know where they are and you kind of know something 
about how they are playing. Is there a way to exclude the 18-
and-under-year-old group from playing these sports? And we all 
know teenage boys live on sports, right? That is all they do.
    Ms. Slader. I can speak to excluding individuals, not 
necessarily about verifying their age or identity.
    When GeoComply does a geolocation, the geolocation is 
anonymous, so we don't know who they are, where they live, 
whether they are a big-time player or anything. All we are 
concerned about is where they are. But if we, based on the data 
that we have, or the operator of the Web site decides that we 
need to exclude this player, cut them off for a certain period 
of time, GeoComply can help with that. We have tools that would 
cause you to always fail a geolocation, and therefore never be 
able to enter a contest. You could do that by their account 
name, you could do it by any device that has ever been 
associated with their account.
    So if they play on two computers and a tablet, we can block 
them all. You could do it by an IP address, so their home 
Internet connection or work or wherever they may have ever 
played. So there are lots of tools at our disposal to keep 
people out if you singled out an individual.
    Mr. Burgess. Yes. But the cleverness of a 16-year-old 
really shouldn't be underestimated.
    Mr. Eggert, how do you recommend that this issue be 
addressed? Is there a way to do it with data, with algorithms?
    Mr. Eggert. Well, the new Massachusetts regulations 
require, you have to prove who you are and you have to have 
only one account and one name. And I think that is necessary 
both to make sure that minors aren't playing the games and also 
to give people tools if they want to self-exclude, you can have 
a process where they can self-exclude and they just can't come 
in with a different name. So I think it can be done, and I 
think it has to be done.
    Mr. Burgess. Yes, but that is for someone who wants to play 
by the rules, but someone who wants to not play by the rules, 
how are you going to exclude them?
    Mr. Eggert. Well, if you have to prove who you are in order 
to play, there may be ways around that, but at least I think 
the states should try to make sure they know who is playing and 
that they are of age and that they haven't excluded themselves.
    Mr. Burgess. Well, Mr. Schoenke, let me just ask you from 
the small business perspective here, how do you see addressing 
that problem? Chairman Upton addressed it, the underage person 
should not be allowed to play. How do you prevent that from 
happening?
    Mr. Schoenke. We as an industry, the FTSA have always been 
against minors playing fantasy sports, paid fantasy sports 
contests for money. Our leading providers and our leading 
companies use something called Know Your Customer technology. 
When people sign up, they give a whole bunch of information on 
them, name, address, they run it through databases using 
leading third-party companies to figure out if the customer is 
who they say they are, and then, you need a credit card, you 
need to sign up for credit card information. And then the 
companies, the major providers of daily fantasy, they don't 
want minors to play. If they find out that a minor is playing, 
they will refund the person in question.
    Mr. Burgess. All right. Let me just ask you, are most of 
the transactions done on a credit card-type transaction----
    Mr. Schoenke. Yes.
    Mr. Burgess [continuing]. Or using bit coins and digital 
currency to----
    Mr. Schoenke. Yes.
    Mr. Burgess [continuing]. For these transactions?
    Mr. Schoenke. Yes. So it is all primary credit cards, 
PayPal, you know, those kinds of transactions.
    Mr. Burgess. Mr. Brubaker, let me just ask you, and I don't 
know, maybe I should be asking others one the panel as well, I 
mean, I don't want to telegraph the limited amount of knowledge 
that I have about this issue, but I am just having a hard time 
with the season-long sports and the daily fantasy sports. 
Clearly those are different avenues.
    I guess what I don't understand is football, if I 
understand correctly, you play a game once a week, any given 
Sunday, and yet daily fantasy sports you are playing these same 
games all week long, but there is no actual game being played. 
So how is that constructed? How do you actually construct a 
daily fantasy sports transaction when the games are only played 
one day a week?
    Mr. Brubaker. So on daily, you bet one game, or you have 
one contest that you play. All right? In season-long, you draft 
your own team to play for an entire season. You are the GM of a 
football team, and you draft the players for your team and you 
enter them for that weekend. And then the next weekend, if you 
have an injury, say Tom Brady gets injured, he is your guy you 
drafted, you have to sit him and put a different quarterback in 
his spot. That is all the work you have to do.
    Mr. Burgess. You are obligated for the whole season at that 
point? You can't fire your team and walk away?
    Mr. Brubaker. I don't believe you can, well, you can. There 
are waivers and there are trades you can do with other people 
within your league to, if you need a quarterback, you can trade 
a running back for another team's quarterback, something like 
that. Those are the transactions that go on in season-long that 
don't happen in daily.
    So daily, you pick your players. Now, I am no expert in 
daily. I did get a FanDuel account a few weeks ago to learn how 
to play that, and I was playing baseball. So in that, you pick 
a pitcher, you pick a catcher, you pick a first baseman, so on 
and so forth, and you lock those people in on your team for 
that game only and you pay your fee. And then at the end of 
that game, all the players that you pick, their stats are added 
up, and if you beat everybody else, you win, if you don't, you 
don't.
    Season-long, you do your draft before the first game of the 
season is played, be it baseball or football. You don't know if 
you won or not until the end of the season after all 16 games 
have been played. So that is the difference.
    Mr. Burgess. Thank you for that.
    Ms. Schakowsky, you are recognized 5 minutes for questions, 
please.
    Ms. Schakowsky. Thank you.
    Professor Eggert, you referred to the Massachusetts 
attorney general who just issued regulations. I am wondering if 
there are any other states or is this the furthest-along model 
of regulation?
    Mr. Eggert. I think it is a good model. I know that 
Tennessee just issued some regulations. To be honest, I think 
those are fairly well-advanced. I think Massachusetts is a good 
model, but I think it can be improved on.
    Ms. Schakowsky. OK.
    Well, one of the concerns that the regulations issued in 
Massachusetts attempt to address is fly-by-night daily fantasy 
sports companies that collect wages and fees from users and 
then fail to pay out. Are you seeing that at all as a problem?
    Mr. Eggert. Well, right now, the industry is dominated by 
the two major companies, and they are far from fly-by-night. I 
haven't heard of instances in the U.S. where that has happened. 
I know it has happened with gaming organizations in the Cayman 
Islands, for example. And so that can well be an issue. I 
haven't seen it here.
    Ms. Schakowsky. OK.
    So, Mr. Brubaker, you are talking basically about the 2 
percent of the industry? Because if 98 percent are dominated by 
two companies, is your space the rest?
    Mr. Brubaker. Well, there have been different statistics 
for what DraftKings and FanDuel mean to the rest of the 
industry. There are daily statistics only, which I think is 95 
percent for DraftKings and FanDuel and 5 percent for the other 
daily providers. There are several other daily providers that 
do daily fantasy sports.
    Ms. Schakowsky. OK.
    Mr. Brubaker. And there are also all the small companies 
that do season-long, which would skew that percentage.
    Ms. Schakowsky. Right.
    Mr. Brubaker. But we are small. I mean, they are small 
companies.
    Ms. Schakowsky. Professor Eggert, are you seeing gambling 
addicts playing DFS? And do you know if this is a big issue?
    Mr. Eggert. I think there was a recent study that indicated 
that there is an overlap between people with problem gambling 
issues and daily fantasy sports play.
    Obviously, this is a very new industry and the kind of 
study that would really nail this down takes a lot to do, and I 
anticipate that we will see more of that.
    Ms. Schakowsky. Thank you.
    You mentioned in your written testimony that Massachusetts 
regulations would forbid daily fantasy contests based on 
amateur sports, such as high school or college. And the NCAA 
has repeatedly professed its opposition to NCAA sports being 
part of it. So why is this prohibition important?
    Mr. Eggert. I think it is important to protect amateurs, 
high school kids, college kids, from having somebody have a 
great interest in whether they score that touchdown or fall out 
of bounds right at the 1-yard line. When we have seen game-
fixing in college sports, it is really hard for a college kid 
isn't making a lot of money, will never go pro, it is very 
tempting to take a pile of money to do the wrong thing. And I 
think we need to protect high school and college athletes from 
that.
    Ms. Schakowsky. Does anybody on this panel disagree with 
that?
    OK.
    In the time remaining, if you could talk a little bit 
more--you did already--about what you would add to 
Massachusetts regulation and what might then be the more 
complete model for States. And are you saying that the state is 
the best place to regulate?
    Mr. Eggert. I think the state is the best place to regulate 
because I think that there are local interests that are 
implicated. I think some states don't want to have gambling or 
daily fantasy sports which are equivalent to gambling, and I 
think that they should have the right to do that if they don't 
want to have it. It shouldn't be forced on them.
    Ms. Schakowsky. So talk to me about what Massachusetts, for 
example, or any state should add in terms of consumer 
protection. That is my emphasis.
    Mr. Eggert. Well, what I would want to look at, these 
regulations have just gone into place, and it would be good to 
see how they work. My concern is I would consider reducing even 
further the limits that they have only the number of entries. 
They allow a decent number of entries, and what we have seen is 
that the professionals enter a lot. And it may be that they 
have overstated the number.
    I would also want to look at a form of labeling of, I 
think, what they call highly experienced players. I think that 
should be based on how much you make rather than have you 
entered a lot of games. Because somebody may have entered a lot 
of games and not be very good, and they shouldn't be labeled 
as, oh, this is a scary person.
    Ms. Schakowsky. It could be a person with a problem, 
though, right?
    Mr. Eggert. It could be a person with a problem, but if you 
over-label as the top players and label many people who aren't, 
I think people will start ignoring the labels. So I would want 
to tighten up who gets labeled as a highly experienced player.
    Ms. Schakowsky. Thank you.
    I yield back.
    Mr. Burgess. The chair thanks the gentlelady.
    The gentlelady yields back, and the chair recognizes the 
gentleman from New Jersey, Mr. Lance, the vice chairman of the 
subcommittee, 5 minutes for questions, please.
    Mr. Lance. Thank you, Mr. Chairman.
    Mr. Locke, as a sports monitoring service in many legal 
international sports-wagering jurisdictions, can you walk us 
through how your technology works to protect the integrity of 
sport? Is usage of this technology required in most legal 
sports-wagering jurisdictions?
    Mr. Locke. Sure. I mean, the technology and the services 
that we offer operate in two distinct areas.
    The first is around the technology play, which allows us to 
aggregate and monitor betting lines internationally. What we do 
is we model how we expect sports events to look on a 
mathematical basis, and then what we do is we overlay what is 
actually going on in international betting markets in a live 
environment with that. And the way that we work with sports in 
that respect is we provide factual data on any anomalies, any 
differences to what we would expect that could indicate issues 
that need to be looked at.
    Also, from a technology point of view, what we do is we 
work with sports to identify correlated risk. So, for example, 
if you are seeing anomalies with particular players and umpires 
or officials all in the same game or all in the same series of 
games, we will highlight that, as well, for sports to look into 
and sports to police.
    The other side, which is important and I think the 
emphasis, especially here, should be focused on is around 
education. The way that we work with sports at the moment is to 
help sports to understand the environment that they work in and 
any of the risks that they may be exposed to.
    A great example of that is if, say, for example, a team 
physio is in a bar having a drink, he runs into somebody, they 
strike up a conversation, they just share the fact that there 
might be a particular injury of a particular player. The guy 
goes away, places some wages, and comes back. He is able to put 
pressure on the physio of the team by saying, ``Listen, you fed 
us some inside information. Here is your share of the 
winnings.'' And he has effectively put him in a position where 
he feels like he is providing inside information.
    So part of our services is around educating the teams, the 
players, the umpires as to the risks that they may be exposed 
to in the markets that they operate in.
    Mr. Lance. OK.
    Anyone else on the panel who would like to comment on that?
    Mr. Brubaker, in your testimony, you discussed the 
challenges for small operators to comply with 50-state audits 
that had been required in recently passed legislation.
    Can you give us a sense of how many of your members have 
players in all 50 states? And do you see a path forward for 
states accepting audits from one another to reduce the 
regulatory burden on smaller operators?
    Mr. Brubaker. So, on the states, there are only 45 states 
that fantasy sports can be played in right now. And so the five 
are going to escape me at this moment, but I would imagine that 
most companies have players from almost every state. Now, there 
are not a lot of players in some states. You may have 400 or 
500 in a state like New Jersey; you may have 20 in Delaware. 
But they are spread out all over the country.
    And the second part of your question was, sir? I am sorry.
    Mr. Lance. Do you see a path forward for states accepting 
audits from another state to reduce the regulatory burden on 
smaller operators?
    Mr. Brubaker. The path forward is for us to get to a lot of 
states and talk to legislators and try to get that changed. 
Some state bills that we have seen just say there has to be an 
annual audit. It is not quite as specific as some other states 
that say it has to be from an auditor within the state.
    And so there is a lot of work to do, and when you are a 
small organization with a small number of companies, that is a 
lot of work and it takes a lot of time. We will push for those 
regulatory issues to be uniform across all the platforms, but 
we are playing catch-up in a lot of these States right now.
    Mr. Lance. Thank you, Mr. Chairman. I yield back 50 
seconds.
    Mr. Burgess. The chair thanks the gentleman.
    The gentleman yields back. The chair recognizes the other 
gentleman from New Jersey, Mr. Pallone, the ranking member of 
the full committee, 5 minutes for your questions, please.
    Mr. Pallone. Thank you, Mr. Chairman.
    I obviously believe there is a lot of hypocrisy surrounding 
the support of daily fantasy sports compared to traditional 
sports-betting. And the daily fantasy sports industry has been 
arguing that daily fantasy sports is somehow completely 
separate from sports-betting despite the fact that similarities 
can't be denied.
    And the same is true of the professional sports leagues. At 
the same time that they are embracing daily fantasy sports, 
they are banding together to prevent New Jersey from allowing 
sports-betting, claiming they are trying to protect the 
integrity of professional sports. It is going to get involved 
in organized crime and illegal stuff.
    So sports-betting, as has been mentioned, is legal in some 
States and in many other countries, including Canada, and the 
sports world is not falling apart.
    My questions are mostly for you, Mr. Gnat. You said in your 
testimony that Canada has had legal betting since the early 
1990s. Is sports-betting in Canada limited to betting on 
Canadian sports, or do Canadians legally bet on American sports 
as well?
    Mr. Gnat. Thank you.
    In Canada, you can bet on any sport in any country. And 
even in certain jurisdictions, as the sports have continued to 
gain sophistication, the offerings have begun to gain 
sophistication as well.
    Mr. Pallone. I am just going to interrupt you because I 
have to get through this.
    Have you heard of any major game-fixing scandals linked to 
sports-betting in American sports since sports-betting was 
legalized in Canada?
    Mr. Gnat. Not to my knowledge.
    Mr. Pallone. All right. So there haven't been any major 
scandals.
    We also know that the illegal sports-betting market in the 
U.S., you mentioned, is estimated to be as high as $400 
billion. So the integrity-of-the-game argument just doesn't 
make sense to me. In fact, legalizing sports-betting would 
simply allow for the same kinds of consumer protections that we 
are discussing today for daily fantasy sports.
    So my question is, would you like to comment on how 
bringing the current black market, organized crime, mob, 
whatever, doing all this sports-betting, if you bring it out 
into the sunshine and make it legal, how could you ensure 
integrity?
    Mr. Gnat. Regulation, just in general, brings an 
environment of accountability, integrity, and consumer trust. 
Prohibiting does not do that. It traditionally drives it 
underground, where you have no integrity in the game. And 
therefore, the people involved are not accountable to anybody, 
and the consumers' interests are not maintained.
    So I think that when you take a look at examples of how it 
has been done in other jurisdictions, even in Nevada, sports-
betting has been done legally and responsibly in other 
jurisdictions, and, as you said, the world does not come 
crashing down around it.
    Mr. Pallone. Kind of like prohibition of alcohol, I would 
think.
    If sports-betting were not legalized, do you see a way to 
stop the practice from occurring illegally?
    Mr. Gnat. I don't see how you can prevent something that is 
an industry of this size and this magnitude that exists today.
    Mr. Pallone. All right.
    Now let me go to the Fantasy Sports Trade Association, Mr. 
Schoenke, if I can.
    I know you said that you can comprehensively answer any 
questions about the industry, because even though FanDuels and 
DraftKings are not here, I am going to ask you the questions 
that they would normally be here to answer.
    Last year, DraftKings applied and received a gambling 
license in the United Kingdom. FanDuel also applied for a 
gambling license, I stress gambling license, in the U.K. but 
hasn't yet received it, to my knowledge. Yet, in the U.S., both 
companies maintain that daily fantasy sports is not gambling.
    So what is DraftKings' rationale for getting a gambling 
license in the U.K. if they say that daily fantasy sports is 
not gambling? And what about FanDuels? How do they justify this 
when they ask for a gambling license in the U.K.?
    Mr. Schoenke. The laws of the United States are very 
different than the laws of the United Kingdom. In the United 
Kingdom, any game that has any skill is also under gambling. In 
America, in most states, if a game has more skill than luck, it 
is not considered gambling.
    That is why fantasy sports, for over 20 years, as an 
enterprise, has never been considered gambling. We didn't meet 
before Congress or at the State levels, but that has been 
called into question the last----
    Mr. Pallone. But they are doing the same thing, right, in 
both places?
    Mr. Schoenke. Well, I think that the laws are different. It 
is a different country. Here in the United States.
    Mr. Pallone. Well, it sounds like in one place----
    Mr. Schoenke [continuing]. If you have more skill than 
luck, it is considered----
    Mr. Pallone. Well, they are not really doing anything 
differently. You are not telling me that, right?
    Mr. Schoenke. Well, it is the same game, definitely.
    Mr. Pallone. OK. That is all I am asking. It sounds like 
the difference is that in one country they have a lot of smart 
lawyers or lobbyists that are defining things in one way and in 
the other they are not. But the game is the same, correct? The 
game is the same.
    Mr. Schoenke. It is still a game that has far more skill 
than luck.
    Mr. Pallone. All right. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Burgess. The chair thanks the gentleman.
    The chair now recognizes the gentleman from Oklahoma, Mr. 
Mullin, 5 minutes for your questions, please.
    Mr. Mullin. Thank you, Mr. Chairman.
    And thank you to the panel for being here. A lot of 
interest in this, more so than members, I think, that are 
interested in it. But, Chairman, appreciate you having the 
hearing. Outside, there are a lot of people wanting to get in.
    And I think there are a lot of unknown facts that people 
are trying to get information, and that is the whole point of 
this panel, OK, what exactly is the way that we are heading? 
What is the future? And how is this going to be a benefit or a 
negative?
    And so I am going to focus just a little bit on this, and 
this is kind of a generic question for the panel itself. Is 
anybody aware of certain pushbacks, lawsuits, concerns through 
the states or through different organizations that have come 
after online betting?
    Anybody want to take that? Not all at once.
    Mr. Rodenberg. I am happy to speak to that.
    Mr. Mullin. OK.
    Mr. Rodenberg. So I think it comes from two distinct areas. 
Certainly, there have been a large number, perhaps dozens, of 
private lawsuits that have been consolidated as part of a class 
action.
    Mr. Mullin. What are those lawsuits concerning?
    Mr. Rodenberg. A number of different claims based on 
allegations of fraud, based on allegations of illegal gambling. 
They are in very preliminary stages. The vast majority of those 
lawsuits have been consolidated in a Federal district court in 
Massachusetts.
    Mr. Mullin. Let me stay there for just a second. On the 
fraud, what specifically are we talking about with fraud?
    Mr. Rodenberg. Allegations have been made of false 
advertising, misuse of inside information, as part of these 
private lawsuits. A number of the claims were similar enough 
that they were consolidated. But they are at such a preliminary 
stage, nothing has been resolved in the course of them, though.
    Mr. Mullin. Is that due to a specific group? Is that due to 
the ability to be able to fraud people online because it is 
faceless and nameless and unregulated?
    Mr. Rodenberg. Perhaps that is a component of it. I mean, 
perhaps indirectly, to answer your question, a majority of the 
defendants are the daily fantasy companies themselves, as well 
as a few of the lawsuits have named investors and affiliated 
companies, including payment processors, including some high-
level successful daily fantasy players. So perhaps some of that 
can be inferred, in terms of who the defendants are.
    Mr. Mullin. What are the qualifications for a fantasy 
sports group to go online? Is there a regulating body that 
oversees it, that says, before you are able to do this, you 
have to comply with certain agreements; we are going to come in 
and we are going to look over your shoulder? Does that exist? 
Or is it just put up a Web site and let's go bet?
    Mr. Rodenberg. In a small minority of states, all literally 
within the last couple weeks--Virginia, Indiana, Tennessee. 
There are regulations in Massachusetts now. Those have recently 
been enacted and signed by state governors, but most of them 
have effective dates sometime this summer, so it is literally 
in its infancy.
    Outside of formal state-run regulations, certainly a vast 
majority of fantasy companies are members of Fantasy Sports 
Trade Association, whether Mr. Schoenke's organization or 
others, but that is certainly more of a private self-regulatory 
model than a formal governmental one.
    Mr. Mullin. Mr. Locke, what did your company have to do?
    Mr. Locke. What did we have to do within fantasy?
    Mr. Mullin. Yes, to build a new business inside the United 
States and to keep down the complaints, make sure it is fair, 
make sure that it is on the up-and-up, so to say. Were there 
certain qualifications you had to comply with, or just use your 
best business model?
    Mr. Locke. So we are not a fantasy operator. We work in 
sports integrity. So we provide services to sports that enable 
them to protect their events. In terms of working in the U.S., 
we have not had to comply with any regulations.
    Mr. Mullin. So you work with the fantasy betting 
organizations?
    Mr. Locke. We don't work with any fantasy betting 
organizations in the U.S. Our prime business in the U.S. is 
working with sports to help protect the integrity of their 
events.
    Mr. Mullin. OK.
    What are the biggest pushbacks, these complaints that we 
are seeing? Is it coming from the state or coming from 
organizations? Is it coming from the sport community itself?
    Mr. Rodenberg. It is related to my previous response. The 
biggest pushback has come at the state level. So, as of 2 weeks 
ago, by my count, there are roughly a dozen state attorney 
generals----
    Mr. Mullin. OK.
    Mr. Rodenberg [continuing]. From New York to Illinois to 
Texas, from Hawaii to Idaho to Georgia to Tennessee, that have 
looked at daily fantasy under the auspices of their state law, 
and they have concluded that it constitutes illegal sports 
gambling in their state. They have issued--whether it is a 
cease-and-desist letter or a negotiated settlement with daily 
fantasy companies. In the last 6 months, fantasy companies have 
removed themselves from those excluded states.
    Certainly the list of excluded states has risen 
dramatically from the original 5 states--Washington, Louisiana, 
Arizona, Montana, and Iowa--to now it is slightly over 15. So 
certainly the number of excluded states has increased in the 
last 6 months. But that is the other, in terms of pushback, 
that has come from the state level so far.
    Mr. Mullin. Thank you. Thank you for your time. My time has 
run out.
    Thank you, Mr. Chairman.
    Mr. Burgess. The chair thanks the gentleman.
    The chair recognizes the gentlelady from New York, 5 
minutes for your questions, please, Ms. Clarke.
    Ms. Clarke. Thank you, Mr. Chairman.
    Mr. McManus, brick-and-mortar casinos are subject to strict 
regulation that mandate consumer protections, such as age 
verification, support for problem gamblers. Casinos can lose 
their license to operate legally if they don't comply with 
these safeguards.
    Of course, consumer protections must be implemented 
carefully and effectively to be successful. Some of the 
consumer protections that have been suggested for daily fantasy 
are similar to those that have already successfully been put in 
place by casino operators.
    I would like to hear from you how MGM complies with 
gambling regulations and protects consumers. For instance, are 
age restrictions on gambling that apply in every state in which 
gambling is permitted? Can you discuss how you ensure that your 
customers are old enough to gamble legally?
    Mr. McManus. Yes. Thank you for the question.
    We only operate land-based casinos. We don't have an online 
presence at this time. So it is a different approach to age 
verification. But we do it the old-fashioned way, as you would 
for serving alcohol. You ask for identification; you verify 
identification. There is extensive training for our gaming 
staff, security staff, and for, frankly, anyone to question 
whether somebody is of age.
    Some states have regulations that require you to present 
identification as you enter a casino. Others, it is just a 
responsibility of the operator to assure that only people of 
age are gambling. Within our facilities in our jurisdictions, 
and I don't know if there are differences elsewhere, the 
minimum age is 21.
    Ms. Clarke. So let me ask, Nevada regulations prohibit some 
gambling by certain employees of the holder of the gambling 
license. What policies do you have in place to ensure that MGM 
employees are complying with that regulation?
    Mr. McManus. Yes, different jurisdictions have different 
rules. Some exclude all employees. In Nevada, if you are a key 
employee, you are excluded. I, for instance, am excluded from 
gambling at our facilities. I could play at a competitor's 
facility. And that is really to avoid even the appearance of 
impropriety, that a gambling game is somehow fixed.
    Ms. Clarke. And what about casino policies for handling 
gamers' money? For example, betting pools are kept separate 
from funds used for casino operations, right?
    Mr. McManus. Yes. In Nevada, we have requirements to 
maintain sufficient cash in our cage to make sure that we can 
pay winners, things of that sort. Again, in the online 
environment, it is a little different because you have an 
account, typically. Most of our customers are paying for chips 
with cash.
    Ms. Clarke. Right. We are just trying to get the 
distinction crystal clear.
    Mr. McManus. Yes.
    Ms. Clarke. You also have policies in place to help people 
addicted to gambling. How do your casino employees identify 
problem gamblers? And how are they trained to respond if they 
learn that a customer may be struggling with a problem gaming?
    Mr. McManus. Sure. And I am by no means the authority on 
problem gaming. There is extensive training, though, for our 
employees.
    And I would say the biggest thing that is uniformly 
accepted in the land-based-casino industry is making 
information and help available. There are 800-numbers. There 
are methods for self-exclusion or self-limiting, in some cases, 
where, somebody who has identified themselves with a problem is 
able to say, ``Please don't let me game here,'' and we enforce 
that. And, frankly, our regulators enforce that, where we would 
be fined if we were marketing to somebody who self-excluded 
themselves.
    How somebody is specifically identified at a gaming table, 
for instance, I am really not the expert on that.
    Ms. Clarke. No problem.
    Are there any other consumer protections that your casinos 
have in place?
    Mr. McManus. We have many consumer protections. Gaming 
regulation is exhaustive. It is thorough. The most basic 
consumer protection is making sure that the casinos are run by 
honest and reputable people and their backgrounds are 
scrutinized so you know who you are dealing with. And then it 
is every aspect of our industry is regulated that you have to 
do it with integrity, from advertising to how you conduct the 
game.
    Ms. Clarke. Very well.
    Mr. Chairman, I yield back.
    Mr. Burgess. The gentlelady yields back.
    The chair thanks the gentlelady and recognizes the 
gentleman from Kentucky, Mr. Guthrie, 5 minutes for your 
questions, please.
    Mr. Guthrie. Thank you. This has been interesting. I 
appreciate it.
    Professor Eggert, in your testimony, you discussed the 
prevalence of scripting tools on daily fantasy sports Web 
sites. My understanding is that a script allows one player to 
enter or change multiple lineups and many contests faster than 
a human could. Is that correct?
    And what about a DFS site could make it more optimal for 
scripting tools than a season-long fantasy sports?
    Mr. Eggert. Yes, that is correct. If you have an algorithm 
that generates hundreds and hundreds of lineups, professionals 
use scripting tools in order to easily input those into the DFS 
site.
    And as far as how it is different from season-long, I 
haven't looked into scripting tools in season-long. My 
understanding is that the purpose of season-long is to do 
trades and things like that where people are much more engaged 
in the game and so the strategy is how to work with other 
players. And so I suspect that scripting tools aren't used that 
much because people are much more hands-on with their 
individual lineups. But, again, I haven't looked at the season-
long as much.
    Mr. Guthrie. OK. Thank you.
    And, Mr. Schoenke and Mr. Brubaker, how do your member 
companies view scripts on their services?
    Mr. Schoenke. So, scripts is a new term; this is a new 
technology. Largely what it was was that the companies didn't 
have the functionality in their own game and so some players 
figured out how to do something on their own, so they developed 
something to swap out players at the last second if there was 
an injury.
    But since then, the industry has shifted in terms of 
scripts. The companies have built a lot more functionality into 
their games so they can do it. Also, the leading companies, 
FanDuel, DraftKings, Yahoo, have banned third-party scripts.
    And we have also seen this addressed at the state level, 
where the state regulations we talked about in Massachusetts 
and also the state laws that are passing in Indiana, Tennessee, 
and Virginia, they also ban third-party scripts as well. So I 
think that is going to minimize any kind of unfair advantage 
that people would have by using these----
    Mr. Guthrie. Mr. Brubaker, you will answer this, Mr. 
Brubaker, as well. I know the service providers, you just said. 
But fantasy games, are they able to detect when somebody is 
using the script on their site?
    Mr. Schoenke. Yes, I can answer that.
    There is technology they are using. They are using the best 
practices. It is definitely the goal. These regulations and 
laws make it an incentive to do it.
    Also, if a customer is caught using a script, there is a 
disincentive for them to use it. Their account will be 
suspended, could be revoked completely. So there is a 
disincentive for them to try to make an end-around as well.
    Mr. Guthrie. OK.
    Mr. Brubaker?
    Mr. Brubaker. For season-long fantasy sports, you do a 
draft before every season starts. So there would be 12 teams in 
a league, and each general manager of that team would hold a 
draft, and they would go through all 12 people, then they would 
start over. You have seen drafts on TV before. Same thing. 
There is no scripting in season-long. Scripting is something 
unique to daily fantasy sports. And it does allow people to 
enter multiple contests. And I think Peter did a pretty good 
job of explaining how they do it on the DFS side.
    Mr. Guthrie. OK. In a previous question, though, you said 
that there are two major players in the daily fantasy sports 
and you represent the small player?
    Mr. Brubaker. So there are two major players in all of 
fantasy sports.
    Mr. Guthrie. So what is the difference? But what is a key 
characteristic of a small player, I guess?
    Mr. Brubaker. Small companies. Small companies. So there 
are probably 80 providers that are not DraftKings and FanDuel. 
And they range, as Peter mentioned, Yahoo is one the larger 
ones, but many are very small companies that have 2,000, 3,000, 
5,000 players total in their company, where DraftKings and 
FanDuel have millions of players.
    So the scale is completely different between what the two 
big companies do and the traditional smaller companies, season-
long companies, that have been around for many, many years.
    Mr. Guthrie. OK. I am about out of time.
    And there was a question previously asked, and Mr. Eggert 
answered it, but, Mr. Brubaker, if you would. Some have made 
the argument that setting a license or registration fee--I am 
going to read quick because I am running out of time--are a 
barrier to entry into the marketplace to keep fly-by-night 
operators from running off with players' money.
    Are fly-by-night operators a concern in the daily fantasy 
marketplace?
    Mr. Brubaker. Maybe Peter should answer the daily question. 
Is that all right?
    Mr. Guthrie. OK. That is fine, yes.
    Mr. Schoenke. In the state laws that we have been 
advocating for, at least with FSTA's work with legislators, one 
of the key components for consumer protection is that the 
consumer funds be protected so that there will be segregation 
of funds. And that is one thing we are strongly advocating for 
at the state legislatures.
    Mr. Guthrie. Well, thank you. I have run out of time, and I 
yield back. I appreciate your answers. Thank you.
    Mr. Burgess. The chair thanks the gentleman.
    The chair now recognizes the gentlelady from Indiana, Mrs. 
Brooks, 5 minutes for your questions, please.
    Mrs. Brooks. Thank you, Mr. Chairman.
    I am very pleased that in this 114th Congress we have been 
in exploring what we call the disruptor series, which changes 
the landscape of the economy. And we have explored things like 
Uber and Bitcoin and now this. And with this packed audience 
today, it is interesting because I think this, too, is 
something that is really kind of disrupting the way we think 
about the world of gaming and gambling.
    And I think it is important for us to explore the largest 
disruptor in the gambling community, the daily fantasy sports. 
But there are a lot of different questions that we have to 
grapple with, as to whether or not, we don't want to limit 
innovation, but we want to protect consumers, and where do we 
find that balance.
    And, obviously, Indiana has just taken the lead in becoming 
the second State in the Nation, as I understand, to adopt what 
we thought was thoughtfully developed legislation. It creates 
the regulatory framework that ensures games are fair, 
participants are over 18 years of age, and that sites allow 
players to restrict their own play.
    And while some of the regulatory measures maybe are stern, 
150,000 Hoosiers are participating in daily fantasy sports, and 
they need to have confidence in the integrity of the products. 
And so I hope that we can continue to explore how to expand the 
safeguards that Hoosiers now enjoy and ensure that we can 
embrace this new trend in sports entertainment.
    A couple of questions that I have. My question is, if we 
don't allow this type of--well, I learned yesterday that the 
total illegal sports-betting market in the United States grew 
to $148.8 billion in 2015--the illegal sports betting.
    And so I guess to Dr. Rodenberg and maybe others, if states 
don't allow this within their state, won't this simply drive 
more competition overseas to places--where are the places that 
we would be competing with? And can you just talk about that 
and can the industry talk about that, if we don't figure this 
out?
    Mr. Rodenberg. Sure. Antigua, Curacao, and Costa Rica are 
the most likely overseas jurisdictions that have sports-book 
operations some may and some may not offer those services to 
American citizens. That is certainly a possibility, that if 
daily fantasy is not legalized and regulated in jurisdictions 
like yours that may be so inclined, that there could be an 
underground market. The offering of DFS is so new, though, I 
think that is a little premature.
    And one interesting figure in terms of the $140-plus-
billion. The overall kind of market of daily fantasy is quite 
small relative to that. I mean, the estimates I have seen are 
anywhere between $3 billion and $4 billion, so it is a very 
small portion of the overall American sports-gaming market.
    So, while important and certainly relevant to the 
disruption and the disruptor series that you are evaluating as 
part of the subcommittee, it is still a small portion of the 
overall American sports-gaming market.
    Mrs. Brooks. However, like Uber and Bitcoin and others, 
they maybe started out small, but look at where it grows.
    Any other comments from anyone else about the offshore 
competition if we don't get this right and figure this out? 
Anyone want to comment?
    Mr. McManus. Yes, I would like to comment.
    I think I can speak for my entire industry here, any form 
of unlawful gambling is bad. And we do find that these forms of 
entertainment are not going to go away if they are made 
unlawful, and you will develop a black market if you don't have 
a legal outlet for daily fantasy.
    One comment I would like to make when we talk about season-
long verses daily, for me the distinction on whether regulation 
is appropriate is whether it is house-banked. If it is a 
season-long fantasy operator who just creates the platform for 
private leagues, I see no need for regulation. But as soon as 
you are taking money from citizens and promising to pay back 
under certain scenarios, you should be regulated, and, 
respectfully, whether it is a small business or a large 
business.
    Mrs. Brooks. Mr. Brubaker, you have talked about the 
difficulty with small operators complying with 50 different 
state audits. And can you give us a sense of how many of your 
members have players in all 50 states?
    Mr. Brubaker. We don't know for sure. That question came up 
previous to your arrival, and there were five states where no 
play is allowed or has been allowed. And Dr. Rodenberg did 
mention there have been some changes since that from different 
attorneys general that have made some decisions. But I would 
say most of our companies have players in every legal state.
    Mrs. Brooks. OK. Thank you.
    My time is up. I yield back.
    Mr. Burgess. The chair thanks the gentlelady.
    At this point, I believe all members' requests for time 
have been honored, and I would recognize the gentleman from New 
Jersey for an additional 5 minutes should he so desire.
    Mr. Pallone. Thank you.
    As to Mr. Brubaker, let me follow up on the gentlewoman's 
comments.
    You talked about the difficulty small fantasy sports 
companies may have trying to comply with so many different 
state laws. So do you support Federal involvement? And is there 
a way to do something at the Federal level that doesn't force 
states who don't want daily fantasy sports or gaming to allow 
it?
    Mr. Brubaker. We will work with just about anybody that 
wants to help us figure this out. If that is the Federal 
Government, we will do that. If it is going state to state, 
that is a much harder path for us to go down.
    Certainly, so we looked at UIGEA as companies, these small 
companies did, and they saw that in 2006 as a green light by 
the Federal Government to go online with fantasy sports. Now, 
that was all season-long at that time. That was before daily 
even was contemplated.
    So we have companies that are relying on you guys and said, 
go ahead and go start your businesses, and they have gone out 
and they have started their businesses. And now we have States 
coming in and changing the game, changing the format.
    I don't think you will hear any daily fantasy sports 
company or season-long fantasy sports company balk at consumer 
protections as long as they are done in a way that is 
financially viable to stay in business.
    Mr. Pallone. All right. Well, maybe that is something----
    Mr. Brubaker. If they get too expensive.
    Mr. Pallone. Maybe that is something we can look into. 
Thank you.
    Let me go back to Mr. Schoenke again.
    And, again, I am asking you specifics about DraftKings and 
FanDuel, which you said you can answer. I want to talk about 
the so-called insider trading scandal that was reported on last 
fall. Ethan Haskell, a DraftKings employee, was accused of 
using information he obtained in the course of his work to help 
his play on FanDuel's platform. And an independent 
investigation cleared him of any wrongdoing, noting that he 
didn't receive the information until his lineup was locked.
    But the report prepared by the law firm that conducted the 
independent investigation was not publicly released. Do you 
know why DraftKings did not release that report?
    Mr. Schoenke. I don't have that information. I know they 
have been pretty forthcoming with a lot of the details of 
what----
    Mr. Pallone. The mike.
    Mr. Schoenke. I apologize. I said I don't have the details 
of that.
    Mr. Pallone. All right. But, again, we are relying on you 
to answer these questions of DraftKings and FanDuel.
    Where did the information received by Mr. Haskell come 
from? Do you know who sent it to him? Was that person playing 
daily fantasy sports? Did that person gain an advantage from 
the information?
    Mr. Schoenke. The information that he had was the number of 
players, the percentage ownership, which may give you an 
advantage if you know that one player, you know, has a lot of 
ownership and one player doesn't. And so it was the internal, 
you know, mechanism to calculate that. And he compiled the 
report after the game was locked, when it was no big deal, and 
there was an inadvertent release of that.
    Mr. Pallone. Well, Mr. Schoenke, you know, since you say 
you can answer these questions, maybe you can't today, but with 
the chairman's permission, I would like you to follow up and 
get back to me and try to answer them on behalf of DraftKings, 
if you would.
    All right. Now, DraftKings prohibits its own employees and 
employees of other daily fantasy sports operators from playing 
on its site, and FanDuel prohibits its employees from playing 
on its own site or other daily fantasy sport sites.
    How does DraftKings ensure that employees of other daily 
fantasy sports operators are not playing? Do competitors share 
their employee lists with DraftKings, to your knowledge?
    Mr. Schoenke. It is also a component of the laws that we 
are advocating for across the country and that have been 
passed. One of the key components is that daily fantasy sports 
companies and, actually, all paid fantasy sports companies 
cannot play on other people's platform. So there is obviously a 
big legal incentive to get it right, as well.
    Mr. Pallone. And how does FanDuel ensure that its employees 
are not playing on another DFS site? Do competitors share those 
lists of users with FanDuel?
    Mr. Schoenke. As far as what the specific companies are 
doing, I don't have that.
    Mr. Pallone. Well, again, I would ask you to find out, 
because Professor Eggert points out that employees have access 
to spreadsheets that show the players who are the biggest 
losers on the DFS sites. And I am just wondering how does 
FanDuel ensure that those lists are not being used to invite 
those losers to head-to-head matches. And same thing with 
DraftKings. You, I guess, can't answer these things right now.
    Mr. Schoenke. No, but we as an industry are advocating for 
laws at the state level to prevent this from happening. And I 
think that will be a big disincentive for any company to allow 
that to happen.
    Mr. Pallone. Well, I am going to ask you to get back to me 
on these questions. Because, again, the two companies didn't 
come, and they say that you can answer the questions. So please 
get back to us. And I will send it in writing, as well, so you 
know.
    Thank you, Mr. Chairman.
    Mr. Burgess. The chair thanks the gentleman.
    A couple of things for followup. And I guess, Mr. Eggert, 
even off topic from what we have been discussing, the concept 
of the amount of data that--or maybe, Mr. Gnat, this is to 
you--the amount of data that is generated seems just to be 
phenomenal.
    And is this useful for anyone else involved in the sport? 
Is, say, a general manager interested in some of these 
performance statistics? It just seems like this has the 
potential for changing the way competition is handled by how 
well you are able to manage these large data flows.
    Would either of you care to comment on that?
    Mr. Eggert. Oh, I think general managers have an 
increasingly great interest in data acquisition and management. 
And I think the sport is moving in that direction, to be more 
data-based and less just see how the person swings the bat. It 
has gotten so far that I think there is an ESPN fantasy sports 
analyst who is good at this kind of data management so that she 
can talk about these issues. So data is becoming increasingly 
important.
    Mr. Burgess. Mr. Gnat, did you have something you wanted to 
add to that?
    Mr. Gnat. Thank you, Mr. Chairman.
    As far as I know, there are lots of sports organizations 
out there today who actually employ members of their general 
manager's staff who are data analysts, who will go and look at 
players and see how they play in certain environments and 
decide how they select.
    I mean, the entire concept of the movie ``Moneyball'' and 
the whole Billy Beane and how he was selecting teams for the 
Oakland As, that is all really based on the concept of starting 
with data analytics.
    Mr. Burgess. Well, Ms. Brooks is quite correct; we have 
been doing the disruptor series, and, of course, at the base of 
the disruptor series is the way data is now handled and managed 
throughout every stratum of our ecosystem right now.
    Mr. Pallone made the observation that this could perhaps 
drive interest in a team that otherwise their won-lost record 
might not generate that much enthusiasm but because you might 
have players that were on a roster you are now interested in 
the performance of that team. And while he was describing that, 
I couldn't help but think that, had this been around 30 years 
ago, the New Jersey Generals might still be a franchise of the 
USFL, but maybe not. I don't know. It is just purely 
speculation at this point.
    Mr. Lance. Purely speculative, Mr. Chairman.
    Mr. Burgess. Well, again, I want to thank our panel.
    Ms. Schakowsky. May I make a comment?
    Mr. Burgess. Yes, please. The gentlelady is recognized.
    Ms. Schakowsky. So, last night, I was one of about 5 
million people who have checked out John Oliver's explanation 
of daily fantasy sports. Regardless of one's position on it, 
you might get a kick out of it. I am not his agent. I get no 
kickback from John Oliver. But it is a humorous but also 
informative, from my point of view, explanation of daily 
fantasy sports.
    Mr. Burgess. The chair thanks the gentlelady.
    Seeing no further members wishing to ask questions for this 
panel, I do want to thank our witnesses for being here today.
    Before we conclude, I would like to submit the following 
documents for the record by unanimous consent: a letter from 
the American Gaming Association; a letter from The Mellman 
Group; a letter from the Stop Predatory Gambling group; a 
letter from the National Conference of State Legislators; a 
letter from the Office of the Attorney General from the State 
of Texas.
    [The information appears at the conclusion of the hearing.]
    Mr. Burgess. Pursuant to committee rules, I remind members 
they have 10 business days to submit additional questions for 
the record. And I ask the witnesses to submit their responses 
within 10 business days upon receipt of those questions.
    Without objection, the subcommittee stands adjourned.
    [Whereupon, at 12:02 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
    
    
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