Virginia has become the first state to approve a law legalizing and regulating daily fantasy sports sites.
Virginia Governor Terry McAuliffe signed the ‘Fantasy Contests Act,” which outlines regulations for sites operating in the state and accepting wagers from Virginia players. The state’s Department of Agriculture and Consumer Service in now in charge of overseeing the industry within the state.
McAuliffe said in a written statement that the act will “empower Virginia to regulate this emerging industry and keep consumers safe from abuses.”
The bill requires fantasy sports sites to pay a $50,000 fee to operate in Virginia and requires players to be 18 years or older. The bill also bans DFS employees from playing on their own or rival DFS sites and sharing insider information and requires the sites to undergo two audits a year.
More importantly, the bill classifies daily fantasy sports as a game of skill and not gambling, something the industry’s two biggest sites—FanDuel and DraftKings—have been pushing for in legal battles in several states.
The law also sets the minimum age at 18, which the industry has been pushing for. Some other states considering similar bills have looked at setting 21 as the age limit.
Both sites praised the Virginia law.
“Today, Virginia became the first state in the nation this year to put in place a thoughtful and appropriate regulatory framework to protect the rights of fantasy players,” DraftKings said in a statement. “We thank Governor McAuliffe for his leadership and advocacy and are hopeful that other states across the country will follow Virginia’s lead. We will continue to work actively to replicate this success with dozens of legislatures and are excited to continue these efforts.”
“Governor McAuliffe and members of the Virginia legislature took a thoughtful, deliberative approach to establishing a law that safeguards fantasy sports while installing consumer protections,” said Cory Fox, a lawyer for FanDuel, in a statement. “Virginia showed real leadership in being the first state to pass smart regulations this year and we hope to see more states follow Virginia’s lead in the months ahead.”
The bill did draw some criticism since it does not distinguish between daily fantasy sites and the more traditional season-long fantasy contests. Critics also said the $50,000 fee may push smaller operators out of the state.
The law goes into effect July 1.
For the DFS industry, Virginia’s move marks one of the first real victories for the sites as they continue to battle for legitimacy in at least 30 states.
The battles range from New York Attorney General Eric Schneiderman trying to shut down the sites in his state to California, where a regulatory bill has passed that state’s Senate.
Nevada Noodles
With the start of the wildly popular NFL and NCAA football seasons about six months away, Nevada gaming officials are trying to figure out how to make daily fantasy sports legal.
Daily fantasy sports operators, casino executives, gaming analysts, and others addressed the Nevada Gaming Policy Committee during a March 7 meeting attended by Nevada Governor Brian Sandoval.
Sandoval wants the state to create regulations enabling daily fantasy sports and similar betting concepts to create more revenue streams for casinos and more tax revenues for the state.
He joined the 12-member gaming advisory board for a four-hour session to address daily fantasy sports and get the ball rolling on making it legal in Nevada.
The advisory board heard from executives at DraftKings and FanDuel, two of the nation’s largest daily fantasy sports operators. Nevada gaming regulators last fall determined daily fantasy sports is an unregulated form of betting and banned it, pending creation of a licensing process.
The daily fantasy sports sites are two of the world’s biggest and say they want to become licensed to operate in Nevada, but the licensing process is too complicated and asks applicants to do too much.
Casinos generally have steered clear of daily fantasy sports, pending the creation of new regulations. But daily fantasy sports is popular among consumers and particularly among the increasingly important millennials generation, which greatly preferred such skills-based and interactive gaming activities.
Several Nevada sports book and casino operators want the state to legalize daily fantasy sports so they can tap into the emerging market, and while they still have the competitive advantage of already having required gaming licenses.
But if the state drags its feet on enacting regulations, and established sites, like FanDuel and DraftKings obtain licenses in the meantime, Nevada-based operators could find themselves losing a great deal of money to their New York-based competitors.
Officials for FanDuel and DraftKings continue to maintain they do not operate wagering systems, but William Hill US CEO Joe Asher told the panel it’s “ridiculous” to consider daily fantasy sports anything other than a form of sports betting.
Asher also told the panel that, unlike licensed gaming operators, the daily fantasy sports operators are not required to keep player funds separate from company operating funds. They also don’t post bonds that demonstrate their solvency, as licensed Nevada gaming operations must do Asher said.
Asher suggested it’s possible for sites like DraftKings and FanDuel to partner with licensed gaming operations in Nevada, but said daily fantasy sports operators must acknowledge the need for them to submit to the state’s licensing process.
Nevada Gaming Commission Chair Tony Alamo said the state already has the regulatory infrastructure in place to begin regulating daily fantasy sports, whether or not DraftKings and FanDuel want to go through the licensing process.
Sandoval said he’d like to see regulatory suggestions from DraftKings and FanDuel.
Texas Deal
In Texas, the state attorney general has reached a settlement with FanDuel requiring the company to stop accepting paid entries for cash prizes in the state on May 2.
In January, Texas Attorney General Ken Paxton’s issued an opinion that online fantasy sports contests are illegal under current Texas law.
“I commend FanDuel for responsibly and pro-actively working with us to reach this settlement,” Attorney General Ken Paxton said in a press statement. “This will spare both the company and the taxpayers of Texas the expense of an extensive lawsuit that I believe would only affirm what my office has already determined.”
Texas law requires only “partial chance” for an activity to be considered gambling, according to Paxton’s opinion.
FanDuel will continue to operate its free games in Texas.
Meanwhile, DraftKings filed a petition for a declaratory judgements in Dallas asking for clarification from a Texas court on the legality of the site’s in the state.
In a written statement, DraftKings’ attorney Randy Mastro called the petition “unavoidable” and said the company feels daily fantasy sports contests are games of skill that comply with state law.
“We are committed to ensuring that our fans can continue to enjoy the contests they love,” Mastro said.
The petition also says that without a ruling, DraftKings payment processors have threatened to stop accepting payments in Texas, which would cause irreparable harm to the site.
Other Developments
DFS sites also got good news in Indiana, which became the second state to send a fantasy sports regulatory bill to its governor.
The state Senate and House have both approved the bill, which also requires a $50,000 licensing fee with a $5,000 renewal fee and hands oversight of the industry to the state’s gaming commission.
Operators may not offer contests based on amateur and collegiate contests under the bill and sets and age restriction for players 18 years or older.
The bill now goes to state Governor Mike Pence.
In New Jersey, State Senator James Whelan, a former mayor of Atlantic City, formally introduced a bill to regulate the DFS industry in the state.
The bill 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, according to the Associated Press.
“Since announcing our efforts to regulate daily fantasy sports, I have spent the last few months meeting with regulators, players and daily fantasy sports officials,” Whelan said. “I can confidently say that we have a good bill that puts important consumer safeguards in place while not impeding people’s ability to play and enjoy daily fantasy sports.”
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 bill’s seeking of taxes is unusual compared to the many DFS bills being considered around the country.
However, a bill being re-introduced in Iowa to allow daily fantasy sports would regulate fantasy sports under that state’s gaming commission and any winnings would also be taxed and earmarked towards Iowa infrastructure.
Finally, In Georgia, an “informal advice” letter from that state’s attorney general’s office requested by the Georgia Lottery Corp., indicates that DFS sites might also be ruled illegal under Georgia’s gambling laws by the state attorney general. The letter did not indicate if the attorney general will seek to take legal action against the sites.
