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The decision by Florida’s top regulator to resign for a position with FanDuel has raised ethical questions about the revolving door between the industry and agencies created to enforce gaming laws, a door that one Republican state lawmaker wants closed.
Louis Trombetta resigned in December as executive director of the Florida Gaming Control Commission (FGCC), only to re-emerge one month later after accepting a government relations position with Flutter-owned FanDuel, one of the two largest sports-betting and fantasy-sports operators in the U.S.
In March, Florida state Representative John Snyder introduced House Bill 1467 to prevent FGCC regulators and agency employees from working within the gaming industry, including at unregulated fantasy-sports companies, for two years after leaving their post. Snyder’s bill has been added to the Florida House Budget Committee's meeting agenda for Tuesday (April 8).
Bob Jarvis, a professor with the Shepard Broad College of Law at Nova Southeastern University in Fort Lauderdale, said Trombetta’s move underlines how Florida is a rare example of a state that has no “cooling-off period”, which is a mandatory gap between working for a regulator and working within the industry they regulate.
Nevada has a one-year cooling-off period for members of the Nevada Gaming Control Board and the Nevada Gaming Commission.
Many other states, such as Pennsylvania, followed Nevada’s example and chose the same cooling-off period after departure from public service.
In New Jersey, former employees of the Division of Gaming Enforcement are subject to a two-year ban on working for licensed gaming companies.
Richard Schuetz, a gaming consultant who believes he “went through the revolving door backwards”, said the movement of regulators into the industry helps to create a phenomenon that economists call regulatory capture.
Schutz worked as the chief executive of the Stratosphere Hotel and Casino in Las Vegas before becoming a commissioner with the California Gambling Control Commission. He also served as executive director with the Bermuda Casino Gaming Commission.
“Regulators, when they’re young, they want to do a lot,” Schuetz said. “But over time, they become a tool of the industry.”
“It’s hard when some people move from the regulator into the industry, Schuetz said. “They may be meeting for drinks after work. It’s nothing unique to gambling, but it’s something I don’t think gambling talks about enough.
“These people are talking to lobbyists, paid by the industry, oftentimes ex-regulators. And they’re telling them, ‘this is how you do it. ’”
In Schuetz's view, even the one-year cooling-off period in Nevada and other states is insufficient.
“I’m a strong believer in cooling-off periods. I think they should be at least two years,” he said.
FanDuel pointed out that Trombetta is not moving from the commission to a company he regulates.
Only the Seminole Tribe is currently permitted to offer sports betting in Florida, and online casinos are not available, so FanDuel’s only offering in the Sunshine State is fantasy sports contests, which are not regulated or subject to any state licensing requirements.
“FanDuel is not a sports betting or iGaming license holder in the state of Florida and is not subject to regulatory oversight by the Florida Gaming Control Commission,” a spokesperson said.
Still, as executive director, Trombetta took an aggressive approach to fantasy sports, ordering Underdog Sports, PrizePicks and Betr to cease operations in Florida due to their pick 'em games, but not targeting FanDuel or DraftKings. He alleged that the three companies may have been involved in illegal sports betting.
But that may raise new questions.
If a company’s products resemble gambling but are not classed as such, where do they stand concerning cooling-off laws?
Fantasy sports, sweepstakes platforms and skill-based gaming machines have all, in different ways, sparked questions about the line between regulated gambling and non-gambling products and whether they should be subject to the same restrictions on hiring ex-regulators.
In Jarvis’ view, it is a challenging situation and it is impossible to write a law that addresses every possible type of move.
Laws could be written to address movement to fantasy, skill gaming and sweepstakes companies in states where they are not already covered by cooling-off periods, but a new ambiguity would emerge.
“They’re all just rationalizations,” Jarvis said. “And they’re symptomatic of what the problem has always been, which is that no matter how you write a cooling-off requirement, you are going to have people who will try to find ways around them.
“It is a game of whack-a-mole.”
Jarvis pointed out that, even within verticals that are unequivocally a form of regulated gambling, operators and former regulators have found grey areas in the law.
“You say I can’t work for Wynn in Las Vegas, okay, I’ll work for Wynn in Boston. Or I’ll work for some other company that’s far enough removed to be allowed. And as soon as the cooling-off period ends, I’ll work for Wynn in Las Vegas.”
The revolving door, he said, has been an issue in just about every regulated industry, from aviation to nuclear energy.
Schuetz agreed.
“Economists seldom agree on anything, but there’s one area that they do agree on, and that’s that regulators have a tendency to be captured by the industry they’re trying to regulate,” he said. “If you go to the more right-leaning economists like Milton Friedman, they’ll just flat-out state it. But if you go to the progressive left, they’ll talk about capture theory.”
But fixes are not easy. If regulators are entirely blocked from taking their talents to the industry — the one other place where their experience would be valued — gaming commissions may struggle to hire qualified employees at all.
Schuetz acknowledged this and said his proposal for longer breaks must be accompanied by higher pay to balance out the lost opportunities.
“You have to pay for talent,” he said.
But both he and Jarvis acknowledged that is a tough sell to taxpayers.
“Would the public want to spend a lot of our money on regulator salaries?” Jarvis asked. “No.”
To Jarvis, there simply is not an easy way around the fact that regulators, in the course of doing their job, will naturally obtain skills and knowledge that could make them valuable to the companies they are regulating.
“I think you can improve the rules at the margins, but only at the margins,” Jarvis said.
In his view, the topic has indeed, as was assumed until recently, more or less been addressed as well as possible.
“If there were an easy fix, you could have done it with nuclear power. You could have done it with the airlines.
“It’s never worked. Nobody has ever come up with a solution that’s worked,” Jarvis added.
