Though New Jersey is considering a bill to legalize and regulate daily fantasy sports, the industry’s two leading site oppose the bill because it does not define DFS as a game of skill.
The bill received a hearing before a state Senate panel and a representative of DraftKings, FanDuel and the Fantasy Sports Trade Association told the meeting that the industry needs the state to adopt the companies’ stance that their products are games of skill and not games of chance, which would classify them as gambling, according to the Associated Press.
The bill was proposed by state Senator James Whelan, a former mayor of Atlantic City.
“Frankly, I’m not smart enough to know if it’s gambling or skill,” Whelan said. “I’ve heard from customers who say, “Oh, I study up and pay tons of attention to this and do my research and I do pretty well. Other states say it’s gambling. There is some element of skill and luck involved, but the goal of this bill is not to settle that issue.”
But A.J. Sabath, a representative of the firms and the trade association said the bill as currently written would “create a significant level of uncertainty about the future of our industry in New Jersey.”
Sabath said that without an explicit definition of daily fantasy sports as a game of skill, the industry cannot invest in setting up operations in the state, the AP reported.
The DFS industry has been fighting for the distinction of being named as a game of skill in as many as 30 states as it fights to conform to each state’s gambling laws. Virginia became the first state to adopt a bill regulating the industry which did classify it as a game of skill.
However, several state attorneys general have ruled DFS is gambling, most notably in New York where that state’s attorney general Eric Schneiderman is fighting to close down the sites.
New Jersey’s bill, however, was approved by the committee as is. Its adds consumer protections and imposes the same 9.25 percent tax rate on daily fantasy sports companies’ gross revenue that Atlantic City’s casinos pay on their winnings, when mandatory reinvestment payments are included.
Under the bill, the Department of Law and Public Safety would oversee and regulate daily fantasy sports in New Jersey, issuing permits to casino licensees and other business entities that want to offer daily fantasy sports games in the state, the AP reported.
The bill now heads to the Senate Budget and Appropriations Committee for consideration.
In some other developments:
In New York, the state Senate has included a provision to regulate daily fantasy sports in its one-house budget bill. The sites would be regulated under the state Department of Financial Services.
Senate Racing and Gaming Committee chairman John Bonacic said the provision would hopefully signal that New York is moving toward legalizing and regulating daily fantasy sports.
“Everything, of course, is subject to court decisions,” Bonacic, who sponsors the legislation, told Gannett newspapers. “But it’s basically we’re sending a message to the court that we’re prepared in the state of New York to allow daily fantasy sports to continue providing it’s monitored, it’s regulated and there are consumer protections.”
In another matter, DraftKings has agreed to money owed to DFS players by the DFS site FantasyHub, the company has announced.
FantasyHub was an Austin, Texas-based DFS start-up that also allowed players to donate winnings to charity, but the site went dark last month leaving players unable to cash out their accounts.
The site was a member of the Fantasy Trade Association and DraftKing’s move is seen as trying to protect the industry’s image as it faces its state-by-state battles.
This is not an acquisition deal or an asset purchase deal,” DraftKings co-founder Matt Kalish told ESPN. “This is a very simple deal, where we’re assigning two liabilities from FantasyHub over to DraftKings in an effort to do the right thing for their player base, which has a nearly 80 percent overlap with our own.
“We never want to see our player base got through an experience that’s negative like this. What happened here was reprehensible,” he said. “It is a breach of trust for these players and we share a lot of these players with them. We just didn’t think it was the right thing to do to sit on the sideline and let that happen. We had the ability to step up and do something.”
DraftKings says the site owed a few hundred thousand dollars to a few thousand players and over $100,000 to charity.
Also, the NCAA—which has opposed daily fantasy sports betting on collegiate athletics—came out against contests both DraftKings and FanDuel are running for the NCAA basketball tournament.
“We have made clear at every point in this national debate that daily fantasy sports competition should not be allowed to be conducted using college, high school, and youth sports programs,” NCAA chief legal officer Donald Remy told the Boston Globe.
The NCAA has blocked advertising for DFS sites during its telecasts, but such advertising has dried up anyway while the industry battles for legitimacy in state legislatures.
In Oklahoma, Native American tribes are granted a monopoly on gaming operations in return for paying specified fees that primarily go to the state’s 1017 Fund, which supplies one-third of all state revenue for education. However, if the legislature passes HB 2278 and SB1396, which would legalize fantasy sports gaming, tribes could end their agreement with the state and stop paying fees.
The tribal gaming compact, established under State Question 712 in 2004, noted the state “provides tribes with substantial exclusivity and special opportunities for tribal economic opportunity through gaming.”The compact also states that tribes only must pay fees “so long as the state does not change its laws to permit the operation of any additional form of gaming by any such organization licensee, or change its laws to permit any additional electronic or machine gaming within Oklahoma.”
Figures from the Oklahoma Gaming Compliance Unit show Indian tribes paid more than $128 million in gaming fees last year, with more than $112 going toward the 1017 Fund for education. Gas and income taxes also contribute to the fund.
Oklahoma Policy Institute Policy Director Gene Perry said, “Oklahoma spends upwards of $2 billion each year on common education, so the $128 million is very roughly 5 percent. Especially at a time when Oklahoma revenue has been low and falling across the board, tribal gaming is definitely an important source of support for schools.”
Nathan Associates economist Alan P. Meister, an Indian gaming specialist, added Oklahoma Indian tribes’ 5 percent is “a meaningful and significant contribution. It doesn’t just benefit tribes, but it’s improving the surrounding community and economy. It’s part of the cost of doing business. Tribes as sovereign nations don’t have to pay taxes, so there’s cost-saving there that’s given back in these fees.”
Perry stated legalizing fantasy sports betting is “definitely something Oklahoma should avoid, especially when we’re in the middle of a giant budget hole. The bill tries to define the fantasy sports games as not gambling, which is what the nationwide industry is trying to push. But in a lot of other states, that hasn’t been upheld, and there’s been several court decisions in other states to say ‘this is gambling.'”
