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Frosh: AG’s office lacks budget to resolve ‘convoluted’ fantasy gaming issue

Maryland’s attorney general Tuesday said fantasy sports gaming in the state is a convoluted and complicated issue for which his office lacks the financial resources to resolve.

“We have priorities [and] resources and we devote them to the most important matters that confront our state,” Brian E. Frosh said during a press conference announcing the state’s lawsuit against Volkswagen. “In a situation that is as difficult and complicated as exists in the arena of daily fantasy sports, we don’t feel that we can bring a criminal action. We’re not sure it makes sense for us to press further in the civil area.”

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Attorney General Brian E. Frosh (File photo)

Frosh added that his office lacked the financial resources to deal with the issue.

“Our budget has been cut by about 7 percent since I was sworn in,” Frosh said before being cut off by a spokeswoman as he was about to tell reporters what his office would require.

Claims of budget cuts might be somewhat overstated, however. A Department of Legislative Services budget analysis released in February notes that the proposed 2017 budget for the agency is $4.9 million less than 2016. The bulk of that is attributed to a nearly $7 million decrease in expenditures from the Mortgage Settlement Fund. Excluding that fund, legislative analysts note that the office’s budget increases by $1.8 million, or 5.2 percent, due to increased spending on health insurance, retirement contributions and a new case management system.

Christine Tobar, a spokeswoman for the attorney general, later clarified Frosh’s statement saying the 7 percent reduction dates back to 2014 when then Gov. Martin O’Malley reduced it by 2 percent followed by additional reductions in 2015 under Gov. Larry Hogan.

Earlier this year, the Office of the Attorney General issued a 22-page advice letter to the General Assembly declaring that sites such as DraftKings and FanDuel were commercial gaming and as such required the approval of voters in a referendum before they could operate in the state. The letter called on the legislature to resolve the issue.

But the House of Delegates and Senate failed to reach an agreement on the issue and a joint committee on gaming has yet to meet on the issue because of the sharp philosophical divide.

Following the session, Senate President Thomas V. Mike Miller Jr. called on Frosh to seek an injunction against the industry.

And while opponents of daily fantasy gaming in Maryland point to language in the letter that supports their claims, supporters say the advisory is murky and does not declare the industry illegal — a fact they say allows them to continue to offer the popular games to what some estimate is 200,000 players in the state.

Last week, Comptroller Peter V.R. Franchot publicly released proposed rules meant regulate the industry, provide consumer protections and ensure that the companies and winners paid taxes to the state.

An assistant attorney general assigned to the comptroller’s office signed off on the proposed regulations but in a cover letter again raised the question of legality that has yet to be resolved.

Under the proposed regulations, fantasy competitions are defined under the 2012 law that was passed by the legislature that authorized what Franchot routinely calls “beer and Fritos” leagues. Brian L. Oliner, in his July 11 memo, cautioned that the 2012 law “likely cannot be read to authorize daily fantasy sports because it was never referred to a statewide referendum.”

Oliner made clear the regulations do not apply to the season-long leagues but that they also could not be interpreted to authorize commercial operations such as DraftKings or FanDuel, the two largest operations.

“Consequently, although the matter is not free from doubt, daily fantasy sports are more likely than not illegal under Maryland law,” Oliner wrote in the memo obtained by The Daily Record.

Frosh demurred Tuesday when asked what his office’s role should be now that the legislature has failed to pass legislation in the 2016 session.

“I think the best answer I can give you is in our 24-page opinion,” Frosh said. “It’s very convoluted, it’s very nuanced. We signed off on the comptroller’s regulations and that’s where we are today.”

Frosh added that his office lacked the financial resources to file an injunction, as some states have done, or otherwise clear up the matter. But he held out the possibility of some future action.

“We’ve not made a final determination on that,” Frosh said. “It’s something we continue to assess and we’ll have a better picture of the performance of the daily fantasy sports industry as the comptroller’s regulations make their way through the process and are implemented.”