Even with the challenges from individual states about the legality of daily fantasy sports, the money kept flowing. That may change after payment processor Vantiv Entertainment Solutions said it will no longer process DFS transactions. The company provided payment processing for both FanDuel and DraftKings.
Vantiv told the companies it was instituting the ban due to the constant challenges of the industry’s legality in states such as New York where that state’s attorney general is trying to shut down the sites, according to a report in the New York Times, and continuing challenges from other states.
According to the newspaper, Jonathan Ellman, chief transaction and marketing counsel for Vantiv, said in a letter that operators’ arguments in their defense “have been unsuccessful and/or rejected.”
David Boies, a lawyer for DraftKings, said that Vantiv must continue to fulfill its contractual obligations to DraftKings, and threatened massive legal action should the ban go into effect.
PayPal is another popular payment option for DFS, but officials there haven’t made a decision. “We are aware of Vantiv’s recent decision to discontinue processing payments for Daily Fantasy Sports services,” PayPal spokeswoman Martha Cass said in a statement. “We continue to review and consider ongoing developments in relation to daily fantasy sports.”
States Rights
Add Mississippi to the lists of state’s where an attorney general has ruled that daily fantasy sports are illegal gambling and ad Honolulu Hawaii to the short list—along with New York state—trying to shut down DFS sites in their jurisdiction.
In Indiana, a bill to regulate and legalize the industry has advanced, but a major payment processor for the sites—Vantiv Entertainment—said it will no longer process DFS transactions.
Such is the state-by-state nature of the battle being fought by the DFS industry and its two biggest sites, DraftKings and FanDuel for another week.
In Mississippi, state Attorney General Jim Hood—responding to a request for clarification from the Mississippi Gaming Commission—ruled that games were illegal in the state, regardless of the amount of skill involved.
DraftKings and FanDuel have long argued that daily fantasy sports are games of skill and not chance. Hood, however, said Mississippi law proscribes a wager “upon any game, play, amusement … or upon the result of any … event or contingency whatever.”
“In our opinion, the possible existence of an element of skill in picking players in a fantasy sports game (or in picking between real teams when wagering on regular NFL games, or in picking horses in a horse race etc.) is irrelevant to any charge of gambling on fantasy sports under Section 97-33-1 of the Mississippi Code,” Hood said in his opinion.
Hood said DFS games were no different than sports betting and horseracing, both of which are illegal in the state and not offered at the state’s casinos.
“In either case daily and season-long fantasy sports, winners are selected based on the tally of points earned by the athletes,” said Hood. “This method of play is similar to betting on a horse race of making a parlay bet. It is different from betting on the outcome of a regular football game only in that the player can choose from any number of hypothetical ‘teams’ which the player can possibly pick or create, rather than being limited to picking from the teams available as they actually exist in the NFL.”
The commission has not made a move to ban the sites in the state and the state’s legislature has not seen the introduction of a bill to clarify or regulate the industry.
In Hawaii, Honolulu Prosecuting Attorney Keith Kaneshiro is demanding that DraftKings and FanDuel stop taking bets from Honolulu residents.
Hawaii Attorney General Doug Chin has already ruled that online fantasy sports contests are gambling, which is illegal in Hawaii.
According to the Associated Press, Kaneshiro told the websites to “immediately cease and desist” from accepting bets from Honolulu residents. Kaneshiro says accepting and profiting from bets is considered promoting gambling, which is a class C felony. That comes with penalties up to five years in prison and a $10,000 fine.
David Boies, an attorney for DraftKings, said the company will withdraw from Hawaii.
“While we disagree with the attorney general’s opinion because daily fantasy sports are games of skill permitted under Hawaii law, we are hopeful our constructive engagement with Hawaii legislators will promptly address the issue so that our loyal fans can continue to enjoy the games they love without anyone questioning the legality of their conduct,” DraftKings said in a statement. “In the meantime, we will voluntarily pause operations in the state but hope to resume soon.”
FanDuel has not commented.
License, Tax and Regulate
And add Indiana to the list of states seeking to regulate DFS rather than ban it.
In Indiana, a bill to regulate fantasy sports in the state was approved by the state Senate, and now goes to the state’s House of Representatives.
The bill declares that wagering on fantasy sports is not gambling and therefore is not subject to the regulations or taxes that face casinos and horseracing.
But the bill would let the state’s casinos partner with existing fantasy sports companies to offer customized games. The bill also requires that game operators verify that participants are at least 18 years old, allow individuals to restrict themselves from playing, and disclose the number of paid fantasy sports games that a single game participant may enter.
Indiana joins California in seeing a DFS regulatory bill pass a legislative house.
In New Mexico, a bill to regulate DFS sites has now been introduced in that state’s House of Representatives.
The bill includes consumer protections such as, employees or the sites are prohibited from playing or sharing of information and statistics not available to the public. Players must be 18 and the sites will pay for an annual third-party audit.
And Florida state Senator Joe Negron has sponsored a measure that would legalize FanDuel and DraftKings and other fantasy sports sites, which claim their games require skill, not chance. Under the bill filed by Negron, the next Senate president, the online companies would pay $500,000 upfront to operate in Florida and $100,000 annually to renew their licenses. Minors would be barred from playing. The companies would not be regulated like casinos or parimutuels and would not be subject to criminal penalties for violations.
Campaign finance disclosures indicate Negron’s political action committee received $10,000 from the Fantasy Sports Trade Association in September. State Rep. Matt Gaetz, who sponsored a similar bill in the House, also received $10,000 from the association. “Government should have little to no involvement in the recreational daily lives of Floridians,” he stated.
Fantasy sports operators’ lobbyists also donated $30,000 to a political action committee run by state Rep. Richard Corcoran, the House Appropriations chairman and future House speaker. A PAC run by the current Speaker, state Rep. Steve Crisafulli, received at least $10,000 from the industry and so did a committee associated with the Senate Appropriations Committee Chairman, state Senator Tom Lee. All of the above are Republicans. But the Florida Democratic Party also received $25,000 from the fantasy sports industry.
However, the Senate majority leader, state Senator Bill Galvano, actually returned $15,000 he received from the Fantasy Sports Trade Association.
The Seminole Tribe of Florida opposes legalizing fantasy sports sites. In 2013, the tribe gave $500,000 to Governor Rick Scott’s PAC, Let’s Get to Work. Recently Scott and the tribe signed a compact giving the tribe’s seven casinos exclusive rights to roulette, craps and blackjack in return for at least $3 billion over seven years beginning in 2017.
While the compact has yet to be ratified, the tribe has distributed more than $2 million to at least 90 state politicians, most of them Republicans, plus several political action committees and both major parties.
In Nevada, the state’s Gaming Policy Committee will examine daily fantasy sports and Governor Brian Sandoval wants Nevada to lead the nation in establishing sound regulations.
Nevada gaming regulators this fall declared daily fantasy sports wagering to be a type of unregulated wagering and, therefore, illegal in Nevada, unless licensed to operate a sports book. That knocked daily fantasy sports giants FanDuel and DraftKings out of the Silver State, but local casino operators want regulations established so they can offer it.
Casino operators are looking toward the future, and the millennial generation in particular, to remain profitable, and study’s show millennials greatly prefer more interactive, skills-based wagering, than their older counterparts, who greatly prefer the simplicity of slot machines and traditional table games.
Daily fantasy sports betting is very popular with millennials, and a potentially lucrative revenue stream, for Nevada’s licensed sports books, especially with DraftKings and FanDuel no longer allowed in the market.
MGM Resorts International CEO Jim Murren says the gaming industry needs to be proactive in meeting the needs of millennial gamblers, while Boyd Gaming CEO Keith Smith advocates regulating daily fantasy sports in a manner similar to regulating online poker.
The casino operators want to ensure their customers have all the options they legally can enjoy, and the market deserves the opportunity to determine whether or not daily fantasy sports is a viable, and profitable, form of wagering in Nevada.
Nevada Control Board Chairman A.G. Burnett said the problem isn’t that daily fantasy sports wagering is illegal in Nevada. The problem is no one who is licensed to run a sports book in the state provides daily fantasy sports betting. DraftKings and FanDuel were declared illegal because they are not licensed in Nevada.
Many other states also halted daily fantasy sports betting within their boundaries, due to licensing issues.
With state regulators and casino officials supporting regulatory efforts, there is a good chance daily fantasy sports will be legal in Nevada, and many other states, in time for the start of the NCAA and NFL football seasons this fall.
