New legislation to regulate and legalize daily fantasy sports has been crafted and is being considered in several states, most notably New York.
The New York move is significant because the state has seen the most high profile challenge to daily fantasy sports legality. State Attorney General Eric Schneiderman sued to stop DFS contests in the state and later struck a deal with DraftKings and FanDuel—the two largest DFS sites—to stop accepting players from the state in March while the legislature addressed the issue.
According to the New York Daily News, new DFS bills have been crafted for both houses of the state legislature and sponsors are confident they will pass.
“We’re going to make it work,” said Senate Racing, Gaming and Wagering Committee Chairman John Bonacic, who introduced a new bill in the Senate last week.
Another bill has been created by Assembly Racing and Wagering Committee Chairman Gary Pretlow for the state Assembly.
Both bills require daily fantasy sports sites to pay licensing fees to the state and impose an annual tax equal to 15 percent of their gross revenues after prizes have been taken out. The bills would also ban the sites from taking action on college and high school games and horse racing, according to the Daily News.
The DFS industry applauded the progress.
“We are seeing major progress and hope the legislature acts soon to make New York the seventh state this year to pass positive fantasy sports legislation that will clarify the legality of these games and install necessary consumer protection regulations,” Cory Fox, director of policy and government affairs for FanDuel, said in a press statement. “There are more than one million players and nearly 30 fantasy businesses in the state watching and waiting for the legislature to safeguard this growing industry.”
Meanwhile, supporters of daily fantasy sports held a rally at New York’s City Hall last week in support of the industry and to urge the state to pass legislation allowing it to resume, the Daily News reported.
Pennsylvania
The Pennsylvania Gaming Control Board last week released its report on the state’s potential role in regulating the daily fantasy sports industry, a report mandated by a law passed by the state legislature that the board examine DFS as a “gambling product.”
The report does not take a position on whether or not daily fantasy sports constitute gambling, saying that the DFS business—which generated an estimated $3 billion last year in entry fees from around 4.5 million players and raised nearly $300 million in revenue—saying that was not the board’s mandate from lawmakers.
Thus, the gaming board left the hotly debated issue of whether DFS is a game of skill, as claimed by the major sports leagues that sponsor it, or a game of chance that must be regulated as gambling, to the state attorney general’s office. However, if the attorney general and/or legislature determine that DFS must be regulated as gambling, the board’s report says it should be treated as all other gambling regulated by the board—as an additional offering of the current casino licensees.
“DFS gained its foothold through an exemption in the definition of “bet or wager” found in the federal Unlawful Internet Gambling Enforcement Act (UIGEA),” the gaming board report said. “UIGEA did not, however, legalize fantasy sports. Rather, issues of the legalization of gambling and related activities have largely been left to the states to address based upon the definitions and nuances of gambling laws in each of the states, which often depend on the degree of skill or chance involved in the play of a contest.”
The attorneys general in 12 states have found that DFS constitutes illegal or at the least gray-area gambling, while two have determined that DFS is legal. Legislation to regulate the activity has been introduced in 29 states, with three states passing legislation to regulated it as gambling.
The Gaming Control Board’s report outlined the Pennsylvania law defining a bet or wager, but made no conclusions:
“Pennsylvania law defines gambling as an activity involving consideration (a bet or wager), an outcome predominated by chance, and a reward or prize for winning the contest,” the report said. “The determination of whether DFS constitutes gambling and hence is illegal in Pennsylvania depends on whether chance or skill is the predominant factor in determining the winner of the contest. While there undoubtedly are elements of both chance and skill involved in the DFS contest, no Pennsylvania court or other body has issued an authoritative pronouncement relative to this issue.”
When that day comes, the report said, casinos should be in charge of offering DFS.
“Should the General Assembly pursue the path of regulating
DFS, the agency responsible for regulation must be identified and licensing fees and/or revenue taxation rates must be determined,” the board said in its report. “If the Gaming Control Board should be given oversight responsibility, the Board suggests that the play of fantasy sports in Pennsylvania be provided through the existing slot machine licensees as a gaming-related amenity operated through the licensee’s website.
“DFS providers would contract with slot machine licensees much like current gaming service providers and would be vetted and licensed as determined appropriate by the Board.
“Operating DFS through the already-licensed slot machine licensees provides several significant advantages to the commonwealth. It provides an in-state presence for the Board’s oversight, eliminates potential jurisdictional disputes, partners DFS providers with established entities which have an existing relationship with the board and regard for Pennsylvania’s regulatory environment, and does not disrupt the funding mechanism for the board’s oversight of slot machine licensees.”
The gaming board report comes on the heels of a May 10 white paper on DFS, sports betting and modern laws on regulation from the libertarian think tank Competitive Enterprise Institute (CEI).
The CEI report presents the popularity of DFS as evidence of the archaic nature of U.S. sports-betting laws.
“The popularity of fantasy sports betting and the regulatory tangle developing around it demand a reassessment of gambling regulation in general, and online gambling regulation in particular,” the CEI report said. “For years, online gambling sites simply re-created poker and established casino games like blackjack, roulette, craps, and slot machines, while offshore sites offered conventional sports betting. DFS, which has never been offered in a brick-and-mortar casino or sports book, owes its existence to the processing power and social networking scale the internet provides.
“This, and the fact that the internet creates virtual communities that can defy state lines and national borders, is forcing lawmakers to reevaluate the degree to which gambling can be regulated, how well prohibitions can be enforced, and whether the cost and resources needed to mount successful investigation and prosecution of illegal gamblers can yield any net gains in terms of community safety or health.
“Good policy begins by recognizing that gambling, whether on the lottery, at the casino, or betting online on the big game, is a legitimate means of recreation. Rather than enforcing subjective morality or trying to protect people from themselves, modern gambling regulation should treat citizens as adults, restore individual choice, protect consumers from crime, and preserve the right of states to regulate and profit from gambling activities within their borders.”
Illinois
The Illinois Senate recently voted 32-22 to pass HB3655, which would legalize daily fantasy sports betting in the state and establish guidelines to allow casinos to set up DFS operations online. The measure also would require players to be at least 21 years old and would impose a 5-30 percent tax on revenue. The Illinois Gaming Board would oversee the games.
However, right after the vote, state Senator Antonio Munoz, a supporter of the measure, filed a motion to put the bill on hold and keep it from moving on to the House. Munoz gave no reason for his actions.
The legislation was backed by DFS operators DraftKings and FanDuel, who say 2 million Illinois residents participate in the games. That makes the state the third-largest DFS market, according to the Fantasy Trade Association which represents about 300 operators.
Some casinos opposed the legislation because they wanted other forms of gambling to be legalized. Paul Gaynor, spokesman for Rivers Casino in Des Plaines, said, “If you’re going to have a conversation about legalizing internet gaming, that should be a comprehensive law.” Sponsor of the bill, state Senator Kwame Raoul noted, “With any bills that come anywhere close to gaming, everybody has their parochial interests that they pile on.” He said lawmakers tried to compromise by including casinos in the legislation, but this bill was not intended to make major changes in state gambling laws.
State Senator David Luechtefeld also opposed the bill because he said it was moving too fast and lawmakers needed more time to study it. “I guess I’ve said to myself, ‘What’s this about? Are we jumping at something right now that we really need to take a longer look at it?’” he said.
Raoul responded, “What we’re doing with this bill is making sure that we’re responsive to the thousands of citizens who play these fantasy sports and making sure we don’t criminalize those citizens who exist in each and every one of our districts.” Illinois Attorney General Lisa Madigan said under current state law, DFS is considered illegal gambling.
At a 2014 hearing on online poker, the Poker Players Alliance said, “Today, Illinois and a handful of other states offer their lotteries over the internet. And of course, for many years, Illinois horse bettors have been able to wager through the internet. Establishing a regulatory regime for online poker and online gaming in Illinois will result in an open and competitive licensed market which would be attractive to both local riverboat licensees and worldwide operators.”
If HB3655 became law, Illinois would be the fifth state to legalize DFS betting. A total of 35 states have introduced legislation addressing DFS, according to the National Conference of State Legislatures. The North American fantasy sports market is worth $26 billion annually, including $2 billion for DFS, according to testimony at a recent Congressional hearing. A 2013 study from H2Gambling Capital indicated the Illinois online casino gambling market could be worth more than $700 million annually.
Indiana
Indiana became the second state after Virginia to legalize daily fantasy sports in March. Now DFS companies have until August 1 to file a letter of intent with the Indiana Gaming Commission, followed by a full application and a $50,000 registration fee due by November. Commissioners will vote on the applications in March 2017. Companies currently operating DFS games can continue in the meantime.
The commission will start to draft DFS regulations after the law takes effect July 1. Gaming Commission Executive Director Sara Tait said, “We have emergency rule-making authority as well as formal rule-making authority. So we anticipate proposing emergency rules in September, and then we also anticipate starting the formal rule-making process probably about that same time.”
Tait said DraftKings and FanDuel handle about 90-percent of the business in the $250 million fantasy sports market, but several smaller companies also operate in Indiana. She said up to three additional companies may seek licenses.
The gaming commission will be responsible for setting technology standards for fantasy sports websites, to make sure credit-card payments are secure and that players must be at least 18 years of age.
Colorado
A bipartisan bill to regulate the industry has been introduced in Colorado. The bill would create a Colorado Office of Fantasy Sports to draft rules for the games and ensure the games are not a front for illegal gambling, according to the Denver Post.
The bill introduced in the Colorado House would require operators to undergo licensing and background checks. Players would have to be 18 years old, and the sites would have to offer self-exclusion lists. Violations could lead to loss of the state license and fines up to $1,000 per violation.
The Post noted that the bill has strong legislative support and is likely to be approved. Its sponsors include House Democratic leader Crisanta Duran and Senate Democratic leader Lucia Guzman. It’s jointly sponsored by two Republicans—Senator John Cooke and Rep. Cole Wist.
“My bill is an effort to codify important industrywide standards to protect consumers and ensure the integrity of all fantasy sports,” Duran said. “Enacting this important legislation will ensure that all providers are taking the necessary steps to protect fantasy sports fans, and will give consumers peace of mind about the integrity of the games they love. It’s the legislature’s job to ensure that Coloradans who enjoy fantasy sports are playing in a regulated, safe environment, where they can be sure that they have a fair shot.”
Also, representatives for FanDuel said the company is still working towards a launch in the U.K., but still have not set a date.
The company applied for a UK gambling license in November and had targeted August for a launch date, but the company’s application is still listed as pending. In an interview with Gambling Insider, FanDuel’s Eilidh Morrison said the company still hopes for an August launch, but said “the date is not set in stone and still provisional.”
DraftKings launched in the UK in February.
