The Massachusetts Gaming Commission recommended Monday that state lawmakers consider additional regulation and oversight of the daily fantasy sports industry, including closer scrutiny of the companies and their employees and clear disclosure of the odds players face.
Perhaps the most important move Massachusetts lawmakers could make, the commission said, is clarifying the legal uncertainty surrounding the games.
In his introduction, Stephen Crosby, the commission's chairman, wrote the cash contests are "surely a gambling-like activity, at least," but noted that the state's regulatory framework around the games is "muddled."
That uncertainty makes playing daily fantasy "a risky activity, both legally and practically for Massachusetts citizens," the commission said, and makes business difficult for companies like Boston-based DraftKings Inc., which the commission called "an innovative new economic engine in our midst."
DraftKings, which employs about 300 in the city, is one of the largest companies in the industry.
The commission was asked last year by Governor Charlie Baker and state legislative leaders to study daily fantasy sports and recommend possible regulatory approaches.
Attorney General Maura Healey has separately proposed new rules largely focused around consumer protections that could take effect this year after a series of public hearings. Healey's proposals include banning players under age 21 and preventing sophisticated contestants from dominating games at the expense of amateurs. The first hearing is scheduled to begin Tuesday in Boston.
Echoing Healey's concerns, the gambling commission suggested leveling the odds for inexperienced players by limiting entries from professionals, or disclosing the odds in a particular game, the report said.
Moreover, lawmakers could consider requiring licenses and background checks for daily fantasy operators as a way to ensure the companies are reputable, the commission wrote. Companies that offer daily fantasy also could be asked to ban employees, professional athletes, and other insiders from playing to avoid any ethical problems, the report said.
However, on the subject of the state extracting money from an industry that has grown into a multibillion business, the gaming commission was more cautious. Noting the companies are still not profitable, the commission said imposing fees or taxes could be "an impediment to viability."
DraftKings and its main competitor, New York-based FanDuel Inc., did not immediately respond to requests for comment on the report.
Daily fantasy games offer large cash prizes for players who select the best-performing roster of real-life athletes, leading to questions about whether the contests amount to gambling. Facing a backlash in some states where officials contend the games are prohibited by gambling laws, the companies have generally advocated for increased oversight that would effectively legalize them.
The commission also suggested assigning oversight of all online games that offer that kind of prize to a single state agency that might be more "nimble and flexible" as it responds to new technology. Under current law, the gambling commission only regulates traditional casinos.
State leaders thanked the commission for its work and said they would review the document. "Governor Baker believes that consumer protections are necessary for online fantasy sports to provide transparency and ensure a level playing field," spokeswoman Lizzy Guyton said.