DraftKings Comments on 11 VAC 5-70 – Sports Betting (Sections 10-20)

PLEASE NOTE text in underlined bold denotes an insertion and text between [brackets] denotes a deletion.

11 VAC 5-70-10           Definitions

“Sports betting” means placing wagers on professional sports, college sports, sporting events, and any portion thereof, and includes placing wagers related to the individual performance statistics of athletes in such sports and events. “Sports betting” includes any system or method of wagering approved by the Director. “Sports betting” does not include placing a wager on a college sports event in which a Virginia public or private institution of higher education is a participant, [nor does “sports betting” include placing a wager on sports events organized by the International Olympic Committee.]

DraftKings respectfully submits that this portion of the definition of “sports betting” be deleted because the Olympics are not specified in the authorizing statute as an impermissible event. The General Assembly was very deliberate in deciding which events were carved out of allowable wagers and Olympic events were specifically not included as prohibited events. In order to fully eradicate the illegal market, the legal market must be able to compete, which means including as wide an array of event and betting options for consumers.

The International Olympic Committee is an international sports governing body that ensures integrity across the events it oversees and, as such, the Board can be assured events comport with ethical standards. Olympic events satisfy the definition of a permissible “sporting event” as defined by 11 VAC 5-70-10, as an athletic event. Given that the Board must approve all permissible wagering events before they are offered, DraftKings respectfully suggests that this definition not be overly prescriptive and give the Board the flexibility to permit or deny events sponsored by the International Olympic Committee during the event approval process.

“Sports betting employee” means an individual who does not meet the definition of a Principal and works within the borders of the Commonwealth for a permit holder, sports betting supplier, or vendor [on non-management support services such as software or hardware maintenance, provision of products, services, information or assets, directly or indirectly, to the permit holder] and either (1) directly manages the sports betting operation or (2) has the ability to directly affect the outcome of sports betting and can deploy code to production for a sports betting platform.

DraftKings seeks clarification on the definition of “sports betting employee” to further understand the scope of employee the Director seeks to capture. The sentence structure is unclear as to whether the phrase “non-management support services such as software or hardware maintenance, provision of products, services, information or assets” modifies the role of the employee or the role of the supplier or vendor.  DraftKings respectfully suggests incorporating language that captures only those individuals with the ability to directly affect sports wagering in Virginia, namely employees that directly manage the sports wagering operation or those that can deploy code and have the ability to affect the outcome of sports wagering.

“Sports betting supplier” or “Supplier” means a person who: (a) manages, administers, or controls a sports betting platform on behalf of a permit holder; (b) manages, administers, or controls [the games on which wagers are initiated, received, or made] risk management functions [on a sports betting platform] on behalf of a permit holder; or (c) maintains or operates the software or hardware that directly affect the operation of [a] sports betting [platform], including geolocation services[, customer integration,] and customer account management.

DraftKings respectfully suggests the above revision due to the undefined and overbroad nature of the definition, which would capture a larger group of suppliers than necessary or reasonable. It is fitting and appropriate to license suppliers that are directly involved in the functionality of sports betting. Such suppliers generally specialize in the gaming industry and are accustomed to licensing processes. However, due to the digital nature of the products, sports betting operators also work with a host of suppliers that have no role in the functionality of the wagering platforms or gaming generally, but rather provide industry-agnostic standard services such as digital advertising and marketing, creative production, and the like to a wide array of customers.

We suggest that the Director limit supplier licensing to integrated suppliers that enable platform functionality, while not requiring licensing of other non-gaming suppliers providing more ancillary services. This will allow Virginia to fully review companies that will have some direct role in sports wagering in the state, while also allowing permit holders to work with the very best non-gaming vendors who might otherwise avoid doing business in the state due to unfamiliar licensing requirements. This approach will ultimately lead to a higher quality product from all permit holders and a better user experience.

Finally, it is unclear how “customer integration” and “customer account management” differ and, thus, we have suggested removal of the term “customer integration.” Should the Director feel this is a separate, essential service to customers, DraftKings respectfully suggests defining the term.

“Sports event” or “sporting event” means professional sports, college sports, and any athletic event, motor race event, electronic sports event, [or] competitive video game event, or any other sports event or combination of sports events approved by the Board.

DraftKings respectfully submits a modification to the definition of “sports event” to provide the Board with flexibility to approve new and emerging sports events while providing permit holders with the widest latitude to offer events, in order to more effectively counter the illegal market. There may be additional sports events throughout the year, such as the Major League Baseball Home Run Derby, the National Basketball Association’s All Star Slam Dunk Contest, the National Football League Most Valuable Player (MVP) Award, or awards shows such as ESPN’s The ESPY’s, that are events that people wager on annually, conducted with integrity standards aligned with Virginia’s expectations.

It has been our experience that regulators who provide sports betting operators flexibility to offer a wide range of wagering events have seen their markets mature the fastest. A sports betting operator’s ability to offer an expansive betting menu in a timely manner will help sports wagering licensees draw players to and retain players in a regulated sport wagering market. Further, these changes would align Virginia’s sports wagering market to other sports wagering markets, including New Jersey and Colorado.

“Vendor” or “sports betting vendor” means a person within the Commonwealth who directly affects sports betting in Virginia on behalf of a permit holder. [is engaged by, under contract to, or acting on behalf of a permit holder] and does not meet the criteria for licensing as a Principal or a Supplier[.]

DraftKings respectfully requests the above clarification be made to ensure that only those vendors directly involved with a sports wagering operator’s Virginia sports betting operation will be required to obtain a license in the Commonwealth. This will ensure that vendors of sports wagering operators – many of which operate sportsbooks in multiple jurisdictions throughout the United States and internationally – are not subject to licensure if they are not directly involved with the sports wagering operation in Virginia. Further, this modified definition will reduce the Director’s administrative burden, as it will not capture more vendors than necessary, while capturing those which are essential to the function of sports betting in Virginia.

11 VAC 5-70-20           Application Process

B. 2. Information and documents submitted to the Director in a permit, license, or registration application shall be sworn under the penalties of perjury as to their truth and validity by the applicant or, if the applicant is not an individual, by the [chief executive officer] an officer of the applicant.

DraftKings respectfully requests this minor change mandating which officer affirms the validity of application materials so that there is additional flexibility for the applicant, while still ensuring there is a member of the executive team attesting the materials are true and valid. As written, the current proposed rule is an overly prescriptive mandate that may be outside the course of normal business practice for applicants. By way of example, a Chief Compliance Officer (CCO) or Chief Legal Officer (CLO) may appropriately attest an application’s validity, rather than a Chief Executive Officer, as the CCO or CLO would have intimate knowledge of the application process and legal requirements for complying with the standards of Virginia’s sports wagering program. The small change would allow any member of the executive suite attest an application’s soundness.

5. A request shall be granted if the applicant demonstrates to the satisfaction of the Director that:

[C. 5. (a). The circumstances requiring the amendment were outside the control of the applicant;]

DraftKings respectfully requests that this section be deleted, as there may be changes made to the application well within the control of the applicant that do not affect an applicant’s ability to provide mobile services while fulfilling the objectives of the Commonwealth’s sports betting program. Removing this provision will encourage applicants to keep application materials up-to-date and continue to supply all relevant information to the Director, without concern of disqualification. By way of example, should the contact information for the applicant change, that would require an amendment, which is likely within the applicant’s control, but could be grounds for disqualification under this provision.

G. 2. If information submitted by an applicant who is issued a permit, license, or registration changes materially during its term, the permit holder, licensee, or registrant shall [immediately] promptly submit to the Director notice in writing of the change.

DraftKings recognizes the importance of providing the Director with timely, accurate information so that he or she may adequately determine the qualifications of the applicant and its suitability to hold a sports wagering permit. However, requiring applicants to notify the Director of every change – including minor, non-substantive changes – to an application will create an administrative burden for the Director and create a situation that greatly impacts the efficiency of the applicant with no increased benefit to the Commonwealth of Virginia. Notification from the applicant of material changes to its application will ensure that the Director is in possession of all pertinent information to aid in its decision. Changing the standard from immediately to promptly will also allow the applicant to timely notify the Director without placing an unduly strict time frame on such notification.

H. 1. Upon request of an applicant, the Director may in his sole discretion issue a temporary or conditional permit, license, or registration to an apparently-qualified applicant.

DraftKings seeks clarification on this section in order to determine when and how an applicant may request a temporary or conditional permit, license, or registration, and under what circumstances that request may be made.

[H. 3. By accepting a temporary or conditional permit, license, or registration, an applicant waives the right to challenge or contest a final decision by the Director concerning the application.]

DraftKings respectfully suggests removal of this provision because of its contradictory nature to Article 2 of the Virginia Lottery Act, which reads “The Director shall make a determination on an initial application for a sports betting permit within 90 days of receipt. The Director's action shall be final unless appealed in accordance with § 58.1-4007.” The above proposed regulation would remove a permit applicant’s right to appeal under the law.

H. 5. c. May be extended by the Director for one period of up to 180 days. Additional temporary extensions may be granted at the discretion of the Director.

DraftKings respectfully requests this addition to the proposed regulations to ensure an applicant is not shut out of the market in the event processing of applications takes longer than expected, despite complying with all application requirements. This addition gives the Director the authority to determine whether an applicant is eligible for extension, while not penalizing applicants for circumstances beyond their control.