California’s Native American interests are reportedly looking into the impact of daily fantasy sports, according to a report on Legalsportsreport.com.
Tribes need to reach consensus on internet gambling in the face of changing market demographics and pending legislation on sports wagering, daily fantasy sports and iPoker, the chairman of the California Nations Indian Gaming Association said.
“The internet looms large in the future of gaming, therefore our future,” CNIGA Chairman Steve Stallings told delegates to the association’s annual meeting. “Whether it’s iPoker, daily fantasy sports or sports wagering, we are going to have to face this digital monster. My hope is that we can find a way to be unified on this new political battlefield.”
The report said a meeting has been scheduled between leaders of several of the state’s 60 casino tribes and state Assemblyman Adam Gray, sponsor of three pieces of legislation to regulate and tax sports wagering, DFS and iPoker.
California’s bill to regulate daily fantasy sports sites has been passed by the state Assembly and awaits a vote in the state Senate.
According to other reports the San Manuel Band of Mission Indians and Morongo Band of Mission Indians both sent letters to Gray saying they feel the bill is advancing too quickly and deserves the same amount of debate the state has had on online poker. The tribes are part of a consortium of tribes and poker rooms that have sought to have iPoker legalized in the state. But opposition from other tribes, most notably Agua Caliente and Pechanga, have put the measure in limbo. The DFS issue may force them to unite, however.
Meanwhile, the daily fantasy sports industry might be better called the daily headline making industry as more developments—some good, but mostly bad—rocked the industry last week.
Most notable was ESPN’s decision to opt out of an exclusive advertising contract with DFS-giant DraftKings.
ESPN has been able to sell advertising to DraftKings’ rival FanDuel in recent months, but an exclusive deal with DraftKings was supposed to begin in January. ESPN, however, opted out of the deal as controversy continues to surround the industry, according to a report on Yahoo.com.
When ESPN first announced the deal last June, the network did not disclose financial details, but said that the partnership “makes DraftKings the official daily fantasy sports offering across ESPN’s platforms” and that it would include, “branding and promotional opportunities across multiple ESPN and DraftKings platforms including integration into digital properties and television programming,” according to the Yahoo report.
ESPN often promoted DraftKings during the recently concluded NFL season, especially on its fantasy-sports-based shows. DraftKings was supposed to guarantee about $200 million worth of advertising on the network, but ads for the sites have dropped sharply as controversy surrounds the industry. The Yahoo report speculated the company may need its funds to fight off legal challenges to the industry in states like New York.
ESPN and DraftKings did not comment for the report.
In another blow to the DFS sites’ ability to process payments, Citigroup announced that it will not process credit or debit payments or transfers to DraftKings and FanDuel by New York residents.
In a statement, Citigroup said it would block the payments until the New York courts ruled on the legality of daily fantasy sports.
The move came after payment processor Vantiv Entertainment Solutions said it will no longer process DFS transactions until legal questions about the industry are settled. The company provided payment processing for both FanDuel and DraftKings
New York Attorney General Eric Schniederman has sued to block DraftKings and FanDuel in the state and is seeking restitution and fines. Schneiderman maintains the sites violate the state’s gambling laws.
The case is the most high profile challenge to the industry and Schneiderman was featured prominently in a report on the industry that aired on PBS’s “Frontline” news magazine. The report was made in conjunction with the New York Times.
The report featured an extensive look at the history of controversy surrounding the industry since news broke of an alleged “Insider trading” scandal at the sites early in the NFL season. Reports said at the time that a DraftKings employee used non-public, inside information to win a substantial cash prize at rival site FanDuel. DraftKings denied that the employee had the information in time to set a roster at FanDuel.
Since then both FanDuel and DraftKings have barred their employees from playing other sites.
The report also focused on allegations the industry used legal loopholes in the 2006 Unlawful Internet Gambling Act—which has an exemption for traditional fantasy sports—to grow and also used digital means to circumvent laws in states where the DFS games are banned.
Representatives for both sites maintained in the report that the sites are legal and daily fantasy sports are games of skill and not chance, something disputed by Schneiderman. That case is scheduled to go to court in the coming months and DFS sites are still currently operating in the state.
Industry Still ‘Viable’
Despite what seems like a tough start for the industry in 2016, industry officials told the Associated Press that DraftKings and FanDuel are still “viable.”
DraftKings spokeswoman Sabrina Macias told the news service that the company isn’t retrenching.
“Our business position is strong and we have no intention to scale back any operations,” she said, pointing to the company’s launch in the United Kingdom last week. “We’re continuing to innovate and learn.”
However, FanDuel has confirmed a report that it laid off another 55 workers last week.
FanDuel said the layoffs are concentrated in its research and development division, which is being shuttered. FanDuel CEO Nigel Eccles, said the company, which has over 400 employees, is focused on making progress on the legislative front.
“What you’re seeing is an industry that’s very quickly going from an unregulated state to a regulated state,” he told the AP. “Whenever you have that, there’s going to be turmoil.”
However, media conglomerate 21st Century Fox recently said in a Securities and Exchange Commission filing that it was marking down the value of its $160 million investment in DraftKings by about 60 percent.
According to a filing with the Securities & Exchange Commission analyzed by CBS News, the parent company of Fox News Channel and the 20th Century Fox film studio, invested $160 million in DraftKings during the six months ended December 31, 2015. DraftKings also agreed to spend a minimum of $250 million on “media placements” on Fox properties through December 2017.
“As of December 31, 2015, based on information concerning DraftKings’ current valuation in a recent financing transaction, the Company determined that a portion of its investment in DraftKings was impaired and recorded a loss of approximately $95 million,” the filing says.
State by State
Meanwhile, the DFS industry continued to duke it out on a state-by-state basis as some states have moved to legalize and regulate the industry.
In one piece of good news, Rhode Island Attorney general Peter F. Kilmartin issued an opinion that found that daily fantasy sports are currently legal under Rhode Island law. But Kilmartin also strongly advised the state legislature to establish regulations to protect Rhode Island players.
In Georgia, state Senator Renee Unterman has proposed a bill to regulate the industry, but the bill does not define DFS as gambling, according to a report in the Atlanta Journal Constitution.
The bill would set standards for operations and pay-outs and would ban anyone under 18 years of age from playing. Companies would have to register in Georgia to accept players in the state and sets an initial $50,000 fee—and $10,000 annually—that would be paid toward the state’ signature education programs including the Hope Scholarship for college students, the paper said.
Unterman called the legislation a “consumer protection” effort, saying an estimated 1.5 million people play daily fantasy sports in Georgia.
In Virginia, a subcommittee in Virginia’s State House approved a bill that would regulate DFS in the state and also not define daily fantasy sports as gambling under the state’s laws.
The bill requires DFS operators to pay an annual registration fee of $50,000. The bill now goes to the state House Committee on Appropriations.
In Nebraska, state Senator Tyson Larson introduced a bill that would classify fantasy contests as not gambling, specifically for those playing daily online fantasy sports. The bill requires contest operators to register and pay the state a registration fee of $50,000 with an annual renewal fee of $10,000.
