February 12, 2016 at 5:00 am ET
Recently, Texas Attorney General Ken Paxton declared daily fantasy sports played on technology platforms like DraftKings and FanDuel, two growing and popular daily fantasy sports websites, illegal, claiming they violate the state’s law against gambling. This follows New York Attorney General Eric Schneiderman’s lawsuit and granted temporary injunction to stop these two companies from operating in his state. And just the other day, Massachusetts Attorney General Maura Healey proposed new regulations that would affect age requirements and deposit limits, which, according to DraftKings attorney Griffin Finan, are “costly and complicated to implement.”
While recent news and activity has surrounded these two companies, the moves are part of a laundry list of activity from attorneys general across the country using their influence to impact policymaking surrounding new and evolving technology platforms. This activity not only affects the businesses in operation, but also consumers who actively seek out these platforms for entertainment, services or business transactions.
As policymaking has taken a backseat to hyper-partisanship at the federal level, state and local officials are filling the void and finding themselves, or directly inserting themselves as in the case of fantasy sports websites, in the crux of major policy decisions.
The bipartisan scrutiny by attorneys general has been far reaching. Companies like Airbnb, Uber, Yelp, T-Mobile, Google, Amazon, Apple and countless others have been involved in state and local investigations and lawsuits across the country.
While the empowerment at the state level is what our Founding Fathers envisioned with the 10th amendment – which gives states and the people the freedom to determine the law beyond the scope of the U.S. Constitution— it leaves a heavy lift for any technology company that must now navigate state law across each of the 50 states. Given the technical capabilities we enjoy today, scale across the country can now launch with the click of a button. But as we’ve seen, circumnavigating the local law landscape remains much more time-consuming, complex, and open to widely varying interpretations.
Attorneys general primarily serve as the chief law enforcement officer, their role being to protect their constituents. They also serve as consumer protection watchdogs to safeguard consumers against unsound business practices. With that in mind, it is also worth noting that these elected officials are extremely aware of the current political environment, as many have larger aspirations for a higher office. In 43 states and in the District of Columbia and Guam, attorneys general are popularly elected, and as a result, are beholden to the changing tides of their constituent base.
Decisions made as attorneys general could ultimately hurt or elevate their profile, and therefore, each opinion matters — perhaps more today than ever before. And each decision now has a voice that is amplified with the growth of digital social media channels.
However, technology companies are not without options. Mobilizing consumers, building relationships with local stakeholders and effectively communicating the benefits they provide to local economies is more important than ever.
As attorneys’ general clout in relation to technology-centric state policies grows, businesses need to be prepared to influence these elected officials – just like they would any other policymaker. In today’s world, companies must be forward thinking and should prepare for the inevitable occasion when a state attorney general steps in to create or change policy that affects growth prospects, the potential audience, and the bottom line. To do so, activating a strong army of local supporters enables companies to influence these impactful decisions.
Companies that play offense with programs that mobilize the most quickly and effectively can turn the tide of policymaking. Companies that ignore the increasing risks that they face, leave themselves vulnerable to unfavorable policies, which then leave them in a costly (and much less effective) game of defense – striving to bring policymakers up to speed and retroactively protect their business model.
As attorneys general grow their power and influence, technology companies will need to leverage and mobilize their consumer base and allies in order to gain traction among each state’s chief legal authority. The ability for a company to do so effectively and swiftly will maximize their ability to be heard and understood, giving companies their best chances to sway these policymakers to rule in their favor.