Daily fantasy sports sites are taking in billions in entry fees in the U.S., recent tax submissions in New York show.
New York requires DFS sites to submit revenue figures for tax purposes. According to a recent release by New York Gaming Commission and reviewed by NorthJersey.com, DFS sites from September 2016 through January 2017 took in a total of $1.83 billion in player entry fees. Winnings totaled $1.65 billion, leaving the companies $188.3 million in gross revenues.
New York residents made up $180.4 million, about 9.8 percent, of that total and won about $18.6 million – leaving the companies with a $2.9 million tax bill for the five months.
The figures show the impact of the NFL season on daily fantasy sports. In January, when the NFL begins its postseason, DFS sites brought in $337,000 in New York-based entry fees. The highest total in New York came in November—during the league’s regular season—with $419,000 in NY-based entry fees, according to NorthJersey.com
Projecting forward and taking into account the NFL offseason the website projected that DFS sites take in more than $300 million in gross revenue annually, with New York likely to receive about $4 million in taxes.
The Albany Times-Union said the performance amounted to 10 percent of all DFS revenue generated by the industry over the same time period, meaning New York, by virtue of its large population and potential fan base, is already one of the leaders in a worldwide DFS market estimated at more than $3 billion a year in handle.
In turn, the state also is shaping up as a major contributor to the fortunes of industry giants DraftKings and FanDuel, which had pulled out of New York prior to the passage of the law last summer and likely would have stayed out with no authorizing legislation in place and would have missed out on a sizable revenue stream during the busy NFL season.
DFS Bill Fails in Kentucky
In another DFS matter, a bill to regulate daily fantasy sports in Kentucky has failed in the state’s House of Representatives.
According to Legal Sports Report, even though the bill was approved by a majority of representatives present for the vote, it failed to pick up the required votes to pass. The bill needed approval by two fifths of representatives—or 40 votes—but only gained 37.
Kentucky has not moved to block DFS sites from operating in the state, but the bill was designed to provide some regulation.
“The Attorney General of New York one day just declared it illegal in New York, and we don’t want that to happen here,” state Representative Adam Koenig told WAVE3 TV news in Louisville. “We wanted to be a legislative solution. We didn’t think that was going to happen, but it was better off to do it this way and to make sure it’s legal.”
The bill had called for an annual registration fee of $5,000 for DFS operators, and a 6 percent tax on gross revenue.
Alabama Lawmaker Sponsors DFS Bill
Alabama state Senator Tom Whatley recently filed legislation making it legal for state residents to bet on daily fantasy sports. “As it is now those IP addresses don’t work when you cross the river into Alabama and there are an awful lot of my constituents who enjoy playing fantasy sports. Several other states have figured out ways to allow it and I don’t think the people of Alabama should be excluded from participating in something that they enjoy,” Whatley said.
He added, “Daily online sports contests are a growing form of sports entertainment with over 35 million participants nationwide and have been legalized in nine states already. It is time we clarified the legal status of these companies in Alabama and establish a level playing field for consumers using their services.”
Whatley’s proposal would require DFS websites operating in Alabama to register with the Secretary of State’s office. It also would establish a fund to collect fees and dues from participating companies. “This isn’t exactly the way I wanted to do it where a fee would be passed on to the players, but sometimes you have to make certain concessions to get a bill passed,” he said.
Whatley noted he insisted that his legislation require annual audits to make sure contest operators are operating in accordance with guidelines. “We want to ensure that consumers are protected and that operators are held to the highest standard of accountability. I’ve never played the online fantasy sports, but it certainly brings a level of interest to football and other sports for the die-hard fan. That’s not something that we need to just across the board say, ‘Not in Alabama.’ I think this bill makes that possible,” Whatley said.
Currently, nine states have legalized fantasy contests and 16 states, including Alabama, are considering DFS legislation this year.
DFS Measure Awaits Mississippi Governor’s Signature
In a 46-6 vote, the Mississippi legislature recently approved House Bill 967, which will regulate daily fantasy sports. The measure awaits the signature of Governor Phil Bryant, who is expected to sign it in light of the state’s declining revenue collections. House Gaming Chair Richard Bennett said although the state may collect only $5 million in annual tax revenue from the DFS industry to start, “I think it will grow.”
The bill designates the Mississippi Gaming Commission to regulate DFS games online or in a casino, including issuing state licenses at $5,000 for three years, and conducting background checks and annual audits on DFS operators. In addition, the measure taxes DFS revenue generated in Mississippi at 8 percent and requires operators to ban employee play, assure players are 18 years or older, secure contest data and keep player and operational funds separate.
Last year state Attorney General Jim Hood determined DFS is an illegal game of chance. Legislation passed allowing DFS, but DraftKings, FanDuel and other DFS operators had left the state prior to that.
About half of the states in the U.S. are actively considering DFS legislation.
