Audit Criticizes Montana Lottery Tie to Racing

By Beacon Staff

HELENA – A legislative performance audit has found that the Montana Lottery’s involvement in fantasy sports gambling doesn’t comply with state law.

The audit, accepted by the Legislative Audit Committee on Tuesday, recommends legislative action to ensure that the state Board of Horse Racing has the authority to contract with the lottery to administer the fantasy sports games.

The Board of Horse Racing and Montana Lottery disputed the audit’s concerns.

“The Board of Horse Racing and the Montana State Lottery have operated within their statutory authority and will continue to provide the fantasy sports games as agreed,” wrote Sherry Meador, an attorney for the horse racing panel. “The fantasy sports game is well-regulated, well-received and has provided the necessary funding to meet its purpose, which is to help horse racing.”

A two-year-old law allows the board of Horse Racing to launch the fantasy sports gambling program in an effort to subsidize horse racing, as other gambling opportunities in the state cut into the amount of betting at horse races.

In June 2008, the state board of Horse Racing, at the suggestion of the governor’s office, entered an interagency agreement to have the lottery provide the fantasy sports gambling.

The audit said the 2007 law did not mention the Montana Lottery nor change the lottery law and “the involvement of the Lottery does not comply with statute.”

The Board of Horse Racing “lacks full legal authority for adopting fantasy-sports gambling rules under the Montana Administrative Procedures Act,” according to the audit, which also recommended that the Board of Horse Racing and the Montana Lottery terminate their agreement immediately.

The audit recommended legislation to provide the Board of Horse Racing with authority to contract for services.

Montana Lottery Director George Parisot wrote that the lottery and the Board of Horse Racing “believe we are on the right track with fantasy sports pari-mutuel wagering.” But he added that both are receptive to recommendations from the Legislative Audit Committee to improve the program.

Parisot said the Montana Lottery “engaged in significant due diligence” before agreeing to help the horse racing industry. He said both the lottery and its attorney agree the lottery has the legal authority to conduct fantasy sports wagering for the board. The joint venture enabled a fantasy sports football game to be developed, implemented and marketed in less than four months.

“Abrupt termination of the existing program could end Montana’s racing program by removing this revenue source without replacement, and retailers would lose on investments already made,” Parisot said.

So far, Montana betting on professional football and NASCAR fantasy sports games has totaled $181,000, with $134,000 of that being paid out in prizes. Nearly $11,000 has gone to the lottery for administering the game, $7,000 to retailers and $29,000 to the Board of Horse Racing.