Regulation

Fantasy Sports Get A Legal Go-Ahead In New York State

The New York legislature has given a thumbs-up to fantasy sports, passing a bill early Saturday (June 18) that explicitly legalizes and regulates fantasy sports betting in New York. It remains uncertain at this time if New York Governor Andrew Cuomo will sign the bill.

If signed, the decision would have a major impact in deciding whether or not daily fantasy sports sites constitute gambling under the law and should thus be subject to various state gambling bans. Indiana, Virginia, Tennessee, Mississippi, Missouri and Colorado have all affirmed daily sports betting as a legal alternative, but other states have seen the issue differently.

The New York decision is, in fact, surprising given that Attorney General Eric Schneiderman was one of the first public officials to declare daily fantasy sports to be a violation of state gambling laws. While a court initially barred DraftKings and FanDuel from continuing to operate in New York, a higher court reversed that decision on appeal.

Now formally legalized by the bill — if signed by New York’s governor — both fantasy sports companies would be allowed to operate in New York, though under a different regulatory and tax system.

In a statement, FanDuel CEO Nigel Eccles said: “New York is the seventh state to pass a fantasy sports bill just this year — frankly, a remarkable amount of progress in a short period of time. It speaks to the popularity of our game, the passion and advocacy efforts of our fans and the immense potential states are seeing in the fantasy sports industry.”

Attorney General Schneiderman said in a statement on Saturday that he would uphold the new law because he is required to by statute but that he will also pursue various consumer fraud charges leveled against each company.

DraftKings Chief Executive Jason Robins, who said previously that New York was the “epicenter” of his firm’s regulatory headaches, affirmed that his company plans to cooperate with the AG’s office going forward “to understand what their concerns are so we can make sure any future advertising we do is addressing those concerns.”

“Then, we will see where conversation goes from there,” Robins said.

The new bill also places some restrictions on fantasy betting sites: Children are not allowed to play, and the New York State Gaming Commission is their regulator (it also regulates the state’s casinos), though daily fantasy sites will be taxed at 15 percent of gross revenue (as opposed to the much higher rate that casinos pay).

The state’s casinos, incidentally, are avid opponents of the bill, on the grounds it pushes a “massive expansion of gambling.” James Featherstonhaugh, president of the New York Gaming Association, argued that the new rules also give fantasy sports companies an unfair advantage.

The casinos argued that fantasy sports sites should be allowed to run only in partnership with existing state casinos.

Fantasy sports sites — aided by professional lobbyists, of course — managed to muster up a strong grassroots effort that saw over 100,000 emails from citizen-fans raining down on state legislators in New York.

One state representative, speaking in favor of the bill, called fantasy sports “nothing but day trading for sports fans.”

The reprensentative — Long Island’s Dean Murray — further outed himself as a fantasy sports player.

“When you’re playing fantasy sports, knowledge is your skill.”

Other legislators argued the bill would legalize gambling, which would violate the New York constitution.

“You’ve got to tie yourself into a pretzel to somehow say that this is not gambling,“ said Thomas Abinanti, a Westchester County Democrat. ”Just because some skill is involved doesn’t remove it from the category of gambling.”

In separate news, reports last week began to emerge that the two fantasy sites may be considering a merger. This is significant since they collectively control 90 percent of the daily sports gaming market. There seem to be no immediate advances to report on that end.

“I think it has potential to be accretive and add value for shareholders,” Robins said. “I’ve been very consistent in that view, and nothing has really changed on my end.”

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