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Bill to legalize fantasy sports could use further protections

Consumer provisions do not cover some important aspects of consumer and athlete security.

Many legislators agree that legalizing with proper regulation is probably the wisest course of action on fantasy sports.
REUTERS/Lucas Jackson

A bill that legalizes fantasy sports in Minnesota passed the state House on April 12. The HF 2540 legislation was proposed by Rep. Tim Sanders, according to whom almost a million Minnesotans play daily fantasy sports (DFS).

Todd Bryant

Fantasy sports are played online, where players can manage rosters of sport teams in the role of a manager. They pay an entry fee to participate and then collect points on the basis of their team’s performance.

The move by Minnesota authorities comes amidst a statewide confusion on how DFS should be treated by the law. Many states have already made some steps to bring clarity in the field, with more than 20 of them having pending DFS legislation.

In some places, legislators have taken a firm stand that fantasy sports are a form of gambling, while others see them as games of skill that do not need tight regulation. Fantasy sports legal issues remain unclear, as consumer protection needs to be accounted for when deciding how to place them within the frames of the law.

Some consumer protection

The goal of the bill that was passed in Minnesota’s House is to prevent fantasy sports from turning into a heavily regulated industry, after it has been in a gray zone for a long time. It declares DFS are not a form of gambling and are legal in the state. For fantasy sports operators, this is certainly good news, as they will not be required to register, nor they will be taxed.

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As for fantasy sports players, Sanders agreed to alter the text by adding a few consumer protection measures. Players will have to be 18 years old, the fantasy games cannot involve college and high school sports, and employees of DFS operators will not be able to participate in the games.

While these provisions account for some of the risks that fantasy sports involve, they do not cover some important aspects of consumer and athlete security. Personal data protection, as well as significant measures against illegal technical hacks such as using computer scripts to gain competitive advantage, have not been included in the bill.

The move to legalize fantasy sports in Minnesota is in line with a general understanding that DFS should be included the law in a balanced way. 

The latest revision of the text even included bonding requirements “for the benefit and protection of fantasy game players’ funds held in fantasy game accounts.”  Surety bonds are a widespread method for regulating a variety of businesses and now they have come to the fantasy sports industry as well.

DFS status across the U.S.

While in most states there are heated debates around fantasy sports, the legal treatment of such developments based on technical innovations remains difficult. Still, many legislators agree that legalizing with proper regulation is probably the wisest course of action.

Fantasy sports are allowed in states like Rhode Island, Maryland, Kansas and Massachusetts, and more recently, Indiana and Virginia too. There are historical bans in Arizona, Louisiana, Iowa, Washington and Montana, so it’s likely that legal battles will be lengthy in those places. Mississippi and Florida are also in line to define the legal status of fantasy sports. Currently, fantasy sports legislation is pending in more than 15 states, while 13 states have no bills treating DFS at all.

States that have taken steps to legalize fantasy sports are usually requiring DFS operators to register or get licensed with a state authority. They need to meet certain criteria in order to be granted the right to operate legally. The purpose of regulating DFS providers is to protect consumers from a range of risks, including personal data protection, as well as financial fraud.

UPDATE: This item was revised to reflect a revision in the bill, which now includes bonding requirements.

Todd Bryant is the president and founder of Bryant Surety Bonds. He is a surety bonds expert with years of experience in helping business owners get bonded and start their business.


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