Call For Regulation Of DFS (Daily Fantasy Sports) Grows Amid Shady Insider Trading Possibility At DraftKings

[Akillies]

More than a week ago, Haskell admitted on a blog post that he had released “player owned percentages” — by mistake, he said — before all the lineups for the third week of N.F.L. games were locked up. The data showed which players — included in more than 400,000 entries — were most commonly selected in lineups submitted to the site’s Millionaire Maker contest.
That week, he won $350,000 on the rival FanDuel site, but DraftKings said he had done so without benefit of inside information. He also won one of 120 seats at FanDuel’s $12 million World Fantasy Football Championship. There he will have the opportunity to win a $3 million first-place check, and he is guaranteed at least $20,000 for showing up, even if he finishes last.
Haskell’s big win followed a hot streak in August, when he finished in the top 10 of 13 Major League Baseball contests, including one contest, with a $25 buy-in, in which he beat nearly 13,000 others to win $50,000, according to the website Larry Brown Sports.

 

[HacheMan]

Daily fantasy sports sites say their users aren’t gambling. They’re wrong.

Why the government won't be leaving DraftKings and FanDuel alone anytime soon

By Dustin Gouker
October 13



On Oct. 5, the Seattle Seahawks played the Detroit Lions on ESPN’s “Monday Night Football.” The game hinged on a late fumble by Lions receiver Calvin Johnson, who lost the ball just before he scored what would have been a go-ahead touchdown. It bounced into the Seattle end zone and (with some help from a Seahawks defender) out of bounds. Under the NFL’s rules, that made it Seattle’s ball, with a three-point lead and less than two minutes left. Game over.

Not just for the Lions, though. Even though the Seahawks never recovered the fumble, it was classified as a turnover by the software powering DraftKings, one of the two dominant daily fantasy sports sites that have exploded onto the NFL scene this year. So it also swung the outcome of the site’s Millionaire Maker contest, winning the week’s $1.2 million top prize for a user calling himself ChipotleAddict. If there were no fumble recovery credited to Seattle, a different bettor would have won the $1.2 million top prize.
That contest took place just as allegations about the security of data and employees’ access to it started to rock the daily fantasy sports industry. Before that, it had been largely smooth sailing for daily fantasy operators, which sprung up in the wake of a carve-out for fantasy sports in the 2006 Unlawful Internet Gambling Enforcement Act. Because it involves making picks based on studying past performance and future projections, daily fantasy sports isn’t gambling. That is what the chief executives of DraftKings, FanDuel and other daily fantasy sites would like you to believe.

But no matter how the law sees it, it’s almost impossible to identify daily fantasy as anything but a way to bet on sporting events from a casual perspective. And if you agree with that assessment, it brings up the obvious issue that daily fantasy is treated very differently than any other type of gambling in the United States. Most forms of gaming are generally highly regulated, limited or considered illegal on a state-by-state basis.


If you’re not familiar with daily fantasy, it’s not a hard concept to grasp. It’s a lot like its season-long cousin that tens of millions of Americans play during NFL season (as well as during baseball, basketball, hockey, even soccer seasons). You pick some players and your fantasy team scores points based on the performance of those players. Your players scoring touchdowns or piling up yardage results in points. If you pick the right players, you can win cash.

The big difference between daily fantasy and the older season-long version is frequency. There are thousands of contests that you can choose to enter on a variety of sites, with entry fees from 25 cents to thousands of dollars. Those buy-ins are how daily fantasy sites make money; they take a percentage of each entry fee. The biggest contests routinely pay out millions of dollars.
Does it sound like gambling, on its face? Gambling can be defined as wagering money on an uncertain outcome — like, say, a last-minute fumble that wins a player more than a million dollars. Sure sounds like daily fantasy fits the bill.

That’s not to say daily fantasy isn’t legal in the United States, although authorities in a few states are making that argument. The aforementioned carve-out from the 2006 federal law paves the way for states to determine the legality of daily fantasy sports. DraftKings and FanDuel — both valued at more than a billion dollars now — pay some lawyers pretty good money to tell them they can operate in 45 states as a “game of skill.” (However, a federal grand jury in Florida is now reportedly looking into daily fantasy companies; several fantasy companies actually operate in fewer than 45 states.)

But jurisdictions outside of the United States and Canada have identified daily fantasy as gambling. To wit, DraftKings has applied for and received a gaming license to operate in Britain, where sports betting is legal and very popular. (It has not started taking wagers across the pond, however.)

This also isn’t an argument against daily fantasy sports being a skill game. The best players in the world will almost always be winners over a large enough sample size; there are daily fantasy pros that make six figures annually. At the same time, some skill can be found in almost every form of gambling, as long as there is a decision that can be made. Good poker players will beat lesser players over the long haul. Skillfully setting a blackjack hand will reduce a casino’s edge.
Over small sample sizes, or single contests, though, there is a lot of variance in daily fantasy results, and no guarantee that skill trumps chance. What the casual fantasy player is doing — betting a few bucks in the hopes of winning millions — is certainly gambling.

The legal repercussions of calling fantasy sports “gambling” is why we’ve heard DraftKings chief executive Jason Robins and FanDuel chief executive Nigel Eccles take turns saying daily fantasy is a skill game, over and over, akin to things like chess, spelling bees or races, as ridiculous as some of those comparisons sound. For example, an amateur chess player will likely never beat a grandmaster; a hastily constructed fantasy lineup will beat a pro’s lineup some percentage of the time. Even pros can put together what appears to be an optimal lineup, but a bad bounce here or an untimely injury there and the best roster of fantasy players — at least on paper — can be blown up. With the sites classified as skill, not gambling, some leagues have gone all-in on daily fantasy: At last count, Major League Baseball, the NBA, the NHL and Major League Soccer all had equity in either DraftKings or FanDuel.
But get outside of the daily fantasy executive suites and you can find plenty of rational people calling DFS gambling:

• Most mainstream media outlets have identified daily fantasy as a betting product, routinely using gambling terms to describe it. Look at TheWashington Post, the New York Times and the Chicago Tribune.
• Gaming executives like MGM Resorts chief executive Jim Murren havecalled out the daily fantasy industry on more than one occasion. He once said, “I don’t know how to run a football team, but I do know how to run a casino, and this is gambling.”
• New York Attorney General Eric Schneiderman, in opening an inquiry into DraftKings and FanDuel, called them “totally unregulated gambling venues.”
• Even some daily fantasy pros can identify it as gambling. Cory Albertson, one such pro, wrote in a Wall Street Journal op-ed: “Let’s cut to the chase here: Playing daily-fantasy sports games for money is gambling.”

The latest to classify daily fantasy as a form of betting? The National Council on Problem Gambling just last week published a resolution about daily fantasy, including statements like this: “NCPG believes fantasy sports contest participants are at high risk to, and do, develop gambling problems.”

Executive Director Keith Whyte says his group has gotten feedback from people in the gambling treatment community that there’s been an increase in problems related to daily fantasy as the sites — and the potential prizes — have gotten bigger. And the symptoms are just like other types of gambling — losing lots of money over a short period of time and becoming obsessed with playing.
“Perception of skill is a big factor in the development of addiction; we see it in things like poker, and we see it in fantasy,” Whyte says. “Especially for the addict, it becomes, ‘The longer I play, the better I get, so I should play more, and especially if I am losing money, the only way to win that money back — and the only way I feel good — is to keep gambling.’ ”

Some daily fantasy advertising reinforces the possibility of problem gambling. In one commercial, a player claims, “It’s like the best adrenaline rush ever!” Another says, “After I played FanDuel the first time, I was hooked!” And it’s those ubiquitous advertisements — DraftKings and FanDuel have combined to spend hundreds of millions of dollars this year on TV commercials — that have drawn scrutiny. That includes from Congress, which appears poised to hold hearings on the industry.

The danger of getting hooked to a skill game with no money on the line would be pretty minimal. But daily fantasy allows users to put money on statistical performances of sporting events, almost at any time they want. That sure sounds a lot like gambling to those of us who don’t have a vested interest in the daily fantasy industry. And if everyone thinks it’s gambling, daily fantasy sites may not be able to keep the government out of their business for much longer.

 

[TheFunkMonkey]

Does it sound like gambling, on its face? Gambling can be defined as wagering money on an uncertain outcome.

Here's an idea --- why not let grown-ass adults do whatever the fuck they wanna do with their own money?

Because in the end, isn't it all gambling? Other than death, is any outcome truly certain?

Investing in your 401k & retirement --- that's a certain outcome? Oh, too bad, you retired in 2000 --- but don't worry, the S&P 500 will recover by 2007! Hope you're still around to enjoy it!

Pumping gas in your car, and driving to work --- that's a certain outcome? Little do you know, you're getting a pink-slip on Friday. Or some candy-fortune billionaire swerves off the road, and kills you (and go figure, she's never charged with a crime).

You donate $300 to Handsome Politician, because he's going to implement policies you agree with, and you believe in his message --- that's a certain outcome? Oh, too bad, those policies get side-tracked for 8 years. Where is our Utopia? We were promised jetpacks!

Life's a gamble, and you might lose. Deal with it. Why do people want to micro-manage the lives of other people?

 

[TheFunkMonkey]

The borderline false advertising by these guys is also making this a bigger deal than it might be..

Borderline false advertising? No worse than beer commercials, car commercials, or fucking McDonald's.

No worse than commercials for the state lottery. No worse than organized religion. No worse than the housing/mortgage industry.

All advertising is false advertising. It's pretty much the point of advertising. The truth doesn't need a 30-second commercial.

Oh no, my 100% bonus only clears at one-percent! How was I supposed to know? I mean, other than reading the terms & agreement. And who can be bothered with reading in 2015........we're too busy with click, click, click, snapgram, LOL!!!!!!!!!!!

 

[HacheMan]

Here's an idea --- why not let grown-ass adults do whatever the fuck they wanna do with their own money?

Agreed.....Isn't it considered communism otherwise?

 

[HacheMan]

[h=1]Fantasy online sports betting getting closer look by Florida[/h] Tuesday, Oct. 13, 2015

Powerful forces are gathering to make sure that Florida doesn’t regulate online fantasy sports gambling.
If you’ve turned on a television set during the past month, you’ve probably seen ads by FanDuel and DraftKings, two online betting companies that have saturated the airwaves at the start of the National Football League season.


These gambling juggernauts spent $26.1 million in ads during the first week of the season alone, and have outpaced beer and automobile advertising in recent weeks.
All to get millions of Americans to imagine that they can, on any given week, pick a collection of players around the league that will perform better than any other collection. Daily leagues. Instant cash payouts. Testimonials from big winners.
The New York-based FanDuel and the Boston-based DraftKings provide websites that host these wagers, which range in entry fees from $1 to $250 — with about 10 percent of the fees going to the companies.
With millions of armchair football experts wagering every weekend, each of them spending an average of nearly $500 a year, these companies are each worth an estimated $1 billion.
So where does Florida come in?
Well, it’s legal in Florida to wager online on fantasy football. For now.
But this year, Florida’s gambling pact with the Seminoles, a multi-year deal that allows the tribe to run blackjack and other casino table games in exchange for a $1 billion payment to the state, expires.
That means Florida’s lawmakers will review the state’s entire gambling picture, an always contentious collision of cross purposes. And one of Florida’s leading voices in gambling legislation, Sen. Rob Bradley, R-Fleming Island, who chairs the Florida Senate Regulated Industries Committee, has started raising questions about fantasy sports wagering.
“They are promoting a product that looks a lot like sports betting,” Bradley told The Miami Herald.
Fantasy sports gambling is illegal in just five states: Montana, Washington, Louisiana, Iowa, and Arizona.
But this month, an insider-trading-like scandal hit these fantasy sports companies. An employee of DraftKings used the inside information he had on betting patterns to make a bet on the rival FanDuel site and win $350,000.
It has prompted investigations by the attorneys general in New York and Massachusetts. And a federal grand jury in Tampa has been empanelled to look into daily fantasy sports wagering in Florida, according to Florida gambling law attorney Daniel Wallach.
Florida used to take a dim view of fantasy sports betting.
In 1991, an advisory opinion of then-State Attorney Gen. Bob Butterworth concluded that Florida law “prohibits the operation and participation in a fantasy sports league whereby contestants pay an entry fee for the opportunity to select actual professional sports players to make up a fantasy team whose actual performance statistics result in cash payments from the contestants’ entry fees to the contestant with the best fantasy team.”
But the federal Unlawful Internet Gaming Enforcement Act of 2006 was passed, a heavily lobbied law that specifically excluded fantasy sports from banned online gambling under the theory that fantasy sports betting relies more on skill than chance.
It has been a questionable, but lucrative justification.
By virtue of that exception, the gambling in fantasy sports has blossomed, creating a nation of transformed sports fans who watch games not to see which team wins, but to see how well the members of their fantasy rosters are doing.
This has increased television ratings for professional sports, especially football, and prompted the leagues to become business partners with these gambling websites.
Two months ago, FanDuel, DraftKings and the Fantasy Sports Trade Association started hiring some of the most influential lobbyists in Florida, even though no legislation is pending in the state. It’s a sure sign that when Florida’s gambling future is hashed out, fantasy sports will have some seats at the table.
George Orwell would find this fitting.
I found myself looking back at the words of Orwell, who in his novel, “1984,” created a Dystopian society where gambling played a key role in maintaining order.
“So long as they continued to work and breed, their other activities were without importance,”Orwell wrote. “Left to themselves, like cattle turned loose upon the plains of Argentina, they had reverted to a style of life that appeared to be natural to them, a sort of ancestral pattern … Heavy physical work, the care of home and children, petty quarrels with neighbors, films, football, beer and above all, gambling filled up the horizon of their minds.”

 

[HacheMan]

Federal Trade Commission could look into DFS sites after controversy

David Purdum, ESPN Staff Writer

United States Sen. Robert Menendez and Congressman Frank Pallone have asked the Federal Trade Commission to investigate daily fantasy sports operators who allowed employees with access to nonpublic information to compete on rival sites.

"Allowing employees of fantasy sports websites with access to nonpublic information to participate in online fantasy games, even if the games are operated by other fantasy sports companies, could give those employees an advantage akin to insider trading," Menendez and Pallone stated in an Oct. 6 letter to the FTC. "Therefore, we also ask the FTC to investigate whether this constitutes an 'unfair or deceptive practice' as defined in Section 5 of the FTC Act.


"We believe that fantasy sports should be legal and subject to appropriate consumer and competitive protections."
The FTC did not immediately respond to a request for comment.

Pallone and Menendez held a news conference at noon Tuesday outside of MetLife Stadium to discuss fantasy sports.
"Daily fantasy sports is an industry crying for consumer protection," Pallone said. "Despite its explosion in popularity and the allegation of 'insider trading' by employees of daily fantasy sports operators, the industry is operating in a void within the legal structure -- without any regulation or the necessary transparency. The backdrop of MetLife Stadium calls attention to the fact that the same professional sports leagues and teams that support and invest in fantasy sports betting are opposed to and serve as a barrier to professional sports wagering. The illegality of sports betting has forced it to function almost exclusively through organized crime, and the lack of regulation of daily fantasy sports has left the industry open to unfair practices and consumer vulnerabilities. Both need to be taken out of the shadows and should be legal and regulated."

Added Menendez: "I have serious concerns about whether these online fantasy sports leagues can police themselves. This is about fairness and ensuring a level playing field for fantasy sports fans. There's a lot of money at stake, and these sites are drawing in tons of players. These players should know they aren't being duped. I think Congress needs to look into this and see whether by exempting fantasy sports from the Unlawful Internet Gambling Enforcement Act, we've created a regulatory vacuum that leaves consumers out in the cold."

Daily fantasy operators DraftKings and FanDuel have been under fire over the past week after a DraftKings employee published data revealing which players were included on the most rosters for an NFL DFS contest. The same weekend, the employee finished second in a contest on FanDuel, winning $350,000.

DraftKings has denied that the employee had access to the data prior to submitting his winning lineup and, along with FanDuel, has since banned employees from participating in public fantasy contests for money.
Menendez and Pallone said the reports of employees playing and winning on other sites "raise serious questions about the integrity of these online fantasy sports websites, and it raises the question of whether there are sufficient consumer and competition safeguards to protect the integrity of these online games."

Pallone, a ranking member of the House Energy and Commerce Committee, has also requested a congressional hearing to examine the "relationship between professional sports and fantasy sports and to review the legal status of fantasy sports and sports betting."
The hearing is expected to be granted, but as of Oct. 13, it has not yet been scheduled.

 

[HacheMan]

<header class="article_header module" style="margin: 0px 10px 6px; padding: 0px; border: 0px; outline: 0px; font-size: 10px; vertical-align: baseline; box-sizing: border-box; position: relative; color: rgb(51, 51, 51); font-family: Arial, Helvetica, sans-serif; background: 0px 0px;">[h=1]FBI, Justice Department Investigating Daily Fantasy Sports Business Model[/h][h=2]FBI agents have been contacting customers of DraftKings to ask them about their experiences[/h]

</header>By BRAD REAGAN and
DEVLIN BARRETT

<time class="timestamp" style="margin: 0px 0px 4px; padding: 0px; border: 0px; outline: 0px; font-size: 13px; vertical-align: baseline; font-family: 'Whitney SSm', sans-serif; display: block; line-height: 2.2rem; color: rgb(102, 102, 102); background: 0px 0px;">Oct. 14, 2015 7:33 p.m. ET</time>The U.S. Justice Department and the Federal Bureau of Investigation are probing whether the business model of daily fantasy sports operators violates federal law, according to people familiar with the matter.



http://www.wsj.com/articles/fbi-jus...aily-fantasy-sports-business-model-1444865627

 

[HacheMan]

FBI, Justice Department Investigating Daily Fantasy Sports Business Model

FBI agents have been contacting customers of DraftKings to ask them about their experiences

By BRAD REAGAN and
DEVLIN BARRETT

Oct. 14, 2015 7:33 p.m. ETThe U.S. Justice Department and the Federal Bureau of Investigation are probing whether the business model of daily fantasy sports operators violates federal law, according to people familiar with the matter.



http://www.wsj.com/articles/fbi-just...del-1444865627

 

[BostonBettor]

DK & FD were idiots for letting their employees play on other sites. If daily fantasy survives the mess that they put themselves in, I can't imagine there not being changes in how these games are run.

 

[LoCalDallasGuy]

I doubt they survive it.... who in their right mind will allow this kind of gambling and not sports or poker lol.

 

[PatsFan1283]

Borderline false advertising? No worse than beer commercials, car commercials, or fucking McDonald's.

No worse than commercials for the state lottery. No worse than organized religion. No worse than the housing/mortgage industry.

All advertising is false advertising. It's pretty much the point of advertising. The truth doesn't need a 30-second commercial.

Oh no, my 100% bonus only clears at one-percent! How was I supposed to know? I mean, other than reading the terms & agreement. And who can be bothered with reading in 2015........we're too busy with click, click, click, snapgram, LOL!!!!!!!!!!!

+1

If people thought they had some great opportunity to turn $20 into 1M then that is on them.

Anyone with a brain should know there is risk involved.

Is E-Trade or Fidelity false advertising too? How come they don't show people on the commercials that have gotten crushed by the market?

 

[doubledeuce22]

Borderline false advertising? No worse than beer commercials, car commercials, or fucking McDonald's.

No worse than commercials for the state lottery. No worse than organized religion. No worse than the housing/mortgage industry.

All advertising is false advertising. It's pretty much the point of advertising. The truth doesn't need a 30-second commercial.

Oh no, my 100% bonus only clears at one-percent! How was I supposed to know? I mean, other than reading the terms & agreement. And who can be bothered with reading in 2015........we're too busy with click, click, click, snapgram, LOL!!!!!!!!!!!

tell it to the Feds and fbi lolololol

 

[TheFunkMonkey]

Walmart tanked 10% yesterday. Ten percent! For a supposedly safe/stable company.

Made me think of this, cough cough, definition..........

"Gambling can be defined as wagering money on an uncertain outcome."

 

[HacheMan]

These guys are in in for a long battle...


[h=1]DFS Class Action Lawsuit Tracker[/h]

In the wake of the DraftKings data leak story that started gaining mainstream attention in early October, plaintiffs have started filing class action lawsuits against DraftKings and FanDuel in a variety or jurisdictions.
Here is a look at the active lawsuits, along with their status and a link to the filings:

State	Status	Lawsuit
New York 1	Filed (Story)	PDF
Illinois	Filed	PDF
Louisiana	Filed (Story)	PDF
Massachusetts	Filed	PDF
New York 2	Filed (attorney, Alan Milstein)	PDF
New York 3	Filed	PDF

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</thead><tbody class="row-hover" style="margin: 0px; padding: 0px; border: 0px; vertical-align: baseline;">
</tbody>

The biggest issue that the lawsuits must overcome is the terms of use that players agree to at both DraftKings and FanDuel. In them, users agree to waive their class action rights, and must undergo arbitration to settle disputes.
The class action lawsuits will likely be combined at some point down the road, but for now, they exist as separate suits.


http://www.legalsportsreport.com/dfs-class-action-lawsuit-tracker/

 

[TheFunkMonkey]

They're an easy target. Watch out asbestos and tobacco, here comes daily fantasy!

 

[Wanger]

Wouldn't be surprised if more states don't start sending cease and desist letters sooner rather than later.

 

[HacheMan]

House Chairman Latest Congressman To Eye Daily Fantasy Sports Hearings


Dustin Gouker, October 17, 2015 19:47 PDT

The calls for a Congressional hearing into daily fantasy sports have grown in the past two weeks, to the point that at least one occurring seems to be inevitable.
At this point, at least three different committees in Congress appear to be interested in a hearing, with a high-level Republican representative the most recent to get into the mix.

The latest rumblings on a Congressional hearing

Rep. Jason Chaffetz (R-Utah), chairman of the House Committee on Oversight & Government Reform wants to hold hearings on fantasy sports in November, according to a report from the New York Post.
There has been no official word on this front, but if the chairman of a committee wants a hearing, it’s almost certain to happen.
Interestingly, Chaffetz is also the sponsor of a bill that seeks to ban online gambling in the U.S., the Restoration of America’s Wire Act. Chaffetz is also running for Speaker of the House.

Other members of Congress that want action on DFS

Chaffetz is far from alone in wanting the federal government to take a look at daily fantasy sports:

• Rep. Frank Pallone, Jr. (D-NJ) was the first to call for a hearing (more below), as well as being the most vocal.
• Senator Robert Menendez (D-NJ) has joined with Pallone to call for action.
• Sen. Harry Reid (D-Nevada) continues to speak on DFS in saying regulation is needed.
• Sen. Richard Blumenthal (D-Conn.) has asked the Federal Trade Commission to look into the DFS industry.
• Rep. Hakeem Jeffries (D-NY) requested a hearing.
• Rep. Dina Titus (D-Nev) asked for hearings, as well.

In the beginning, New Jersey makes call first

The first request for a hearing came in September — weeks before the DraftKings data leakmorphed into a story covered by the mainstream media.
The request was made by Pallone, the ranking member of the House Energy and Commerce Committee. At the time, some observers chalked it up as a media ploy to draw attention to his state’s ongoing battle to legalize and regulate sports betting. And, obviously part of the strategy was to call attention to the fact that you can’t bet on sports very many places, while daily fantasy sports remained an unregulated activity.
Here are some of his statements from a press release in which he announced that he sent a letter to committee Chairman Fred Upton (R-MI) and Commerce, Manufacturing, and Trade Subcommittee Chairman Michael C. Burgess (R-TX):“Anyone who watched a game this weekend was inundated by commercials for fantasy sports websites, and it’s only the first week of the NFL season,” said Congressman Pallone. “These sites are enormously popular, arguably central to the fans’ experience, and professional leagues are seeing the enormous profits as a result. Despite how mainstream these sites have become, the legal landscape governing these activities remains murky and should be reviewed.”
…
“Fans are currently allowed to risk money on the performance of an individual player. How is that different than wagering money on the outcome of a game?”noted Pallone.
Also back in September, Upton said a hearing was likely to happen.


Pallone remains on offensive

After the story picked up momentum in October, Pallone continued to beat the drum for a hearing:

• He released a statement the week the story hit.
• Along with Senator Robert Menendez (D-NJ) he held a press conference near an NFL stadium calling for a closer look at the DFS industry.
• He lauded the decision by Nevada to classify DFS as gambling.

 

[UncleMeat]

Love these politicians wasting their time on DFS while Rome is burning. Basing their decisions on who gives them more money and the taxpayers end up paying for the regulation. Like there's a difference between DFS and the stock market. Here's a solution. Give the people what they want. Let the professional teams form and pay for a commission to regulate the process since they have most to lose and most to gain from it.

 

[HacheMan]

Don't outlaw fantasy sports; regulate them
October 19, 2015



The following editorial appears on Bloomberg View:

In the past few weeks, the fantasy sports business learned it was facing an FBI probe, an investigation in New York, a ban in Nevada, inquiries from Congress, multiple lawsuits, and a raft of alarming questions about the misuse of confidential data. It also had its most prosperous weekend ever.

That's a paradox familiar to enthusiasts of slot machines and lotteries: Gambling is treacherous, and it's also fun. Daily fantasy sports -- clearly a form of gambling, despite what practitioners say -- are no exception. They should be subject to oversight just as other legal forms of wagering are. Regulators should ensure that the games are run transparently and with integrity. And then gamblers should be free to lose money on them fair and square.

The now-booming websites -- such as DraftKings and FanDuel, on which contestants pay to select a roster of players and earn points based on their real-life performance -- owe their existence to a loophole. The Unlawful Internet Gambling Enforcement Act, passed by Congress in 2006, banned most online gambling but carved out an exemption for fantasy sports sites. At the time, such sites typically allowed players to assemble teams and compete over the course of a season. The daily version -- which started in 2009, and more closely resembles traditional gambling -- exploits this exemption.

As a result, the industry is conducting an inadvertent experiment in legalized sports gambling -- one that should now inform a larger debate. After all, perceptions of sports gambling are evolving. Most voters support legalizing it, and at least six states are mulling legislation on the topic. Even NBA Commissioner Adam Silver wants to legalize it.

The fantasy experiment that Congress has unintentionally enabled should help determine if that's a good idea. But it will work only if regulators -- state and federal -- put some sensible rules in place to protect consumers.

Proprietors of daily fantasy sites should be licensed and regulated much as casinos are, to ensure their operations are transparent. The technology they use -- including algorithms that determine the "price" of each player -- should be subject to audits. So should their safeguards against fraud and the misuse of inside information by employees. Geolocation tools, which can block players in states that prefer to outlaw the contests, should be mandatory. And rules about what technology players can deploy to their advantage should be spelled out more clearly. Actually, pretty much everything these sites do should be spelled out more clearly.

More important, the companies should be required to take measures to protect gambling addicts from themselves. Because they operate online, with payment information linked to each user, they should be able to verify identities, enforce limits on losses and use data patterns to recognize problem gamblers. State regulators could mandate other protective measures based on the National Council on Problem Gambling's standards. And fantasy advertising during sports broadcasts -- an enticement to children and addicts alike -- should be banned.

Which raises a final, crucial problem: the unholy financial alliance between these sites and professional sports leagues. As a matter of common sense, Congress should bar leagues from investing in fantasy gambling sites, displaying their ads or having any other business relationship with them.

Even with such precautions in place, fantasy sports gambling may boost rates of addiction and related ills. And the riches at stake may begin to corrupt real-life sports. Policy makers should be alert to these dangers, and proceed with caution. That's pretty good advice for gamblers, too.