Early this morning, on the last day of the current session, The New York Assembly passed legislation legalizing daily fantasy sports throughout the state of New York. While the bill still needs to be signed by Governor Andrew Cuomo, its passing is a big win for the entire industry.
The Battle Ends
Due to the large concentration of daily fantasy sports players in the state (about 10 percent of the national market), New York has always been at the center of the country-wide fantasy sports debate, and is seen as a model for other states in the country.
Plus, New York Attorney General Eric Schneiderman was one of the first public officials to order DraftKings and FanDuel to cease-and-desist operations in the state, saying that daily fantasy sports violated his state’s gambling laws. This was likely the impetus for similar notices from Attorneys General in other states like Texas and Illinois.
This cease-and-desist notice was followed by legal action from both sides. DraftKings and FanDuel jointly filed a lawsuit against Schneiderman then subsequently received a stay to continue operating in the state until the state’s supreme court made a final decision.
But a legal battle was never the goal for the two companies. DraftKings and FanDuel knew that to permanently cement operations in New York (and other states), they would have to fight a legislative battle, getting new laws passed that explicitly legalized their operations and delineated it from sports gambling.
So the companies (and related lobbyist organizations) took their battle to states’ capitals. And it worked. In March, Virginia became the first state to legalize daily fantasy sports and impose state-led oversight of the industry. This was followed by similar legislature in Indiana, Tennessee, Mississippi, Missouri, and Colorado.
And while some other states have declined to explicitly legalize the industry, New York’s actions may send a signal to these states that it is O.K to proceed with new legislation.
Stricter Oversight
The bill can be found here, but it essentially amends the state’s current gambling laws to include “regulated interactive fantasy sports contests with an entry fee”.
Under the new legislation, providers will have to apply for registration with the state before being allowed to operate. But, in another win for DraftKings and FanDuel, companies that offered contests in NY before November 10th, 2015 (the day AG Schneiderman ordered them to cease-and-desist) will be allowed to operate in the interim until their application is approved or denied.
The bill also establishes some safeguards protecting players in the state. These include:
- Restricting players under the age of 18 from participating
- Ensure that the accurate odds of winning are actually represented in all advertisements
- enabling players to permanently exclude themselves from future games (and potential losses) at any time
- Identifying highly experienced players on the platform
The most interesting restriction is probably the last one, and seems to be designed from having amateurs unknowingly enter contests with professionals, where they presumably have a much smaller chance of winning. This is important because it alludes to the fact that results are impacted by skill, something that differentiates it from luck-based gambling.
The bill also requires operators to pay a 15% tax on gross revenue made from interactive sports contests in NY, which will go to the state lottery fund for education.
These restrictions actually provide a good amount of consumer protection, and may serve as a guideline for future states looking to legalize the industry while providing safeguards to protect participants.
While not yet signed into law, the bill is a promising development for daily fantasy sports operators both in NY and around the country. This bill will undoubtedly lead to similar actions in other states, and is a major win for companies like DraftKings and FanDuel.
Reactions
In a statement provided to TechCrunch, DraftKings’ CEO Jason Robins said:
“I grew up playing fantasy sports and have watched it evolve over decades. The last few years have seen some of the most exciting innovations since the invention of the game, and I believe this is only the beginning of what has become a revolution in how fans experience sports. To see state legislatures and policy makers around the country take action to address and welcome a burgeoning industry is truly special, and to have New York added to that list is a wonderful thing. I am hopeful that Governor Cuomo will soon sign the bill into law so our fans can get back to playing the games they love.
I would like to thank the leadership of both chambers, especially our bill sponsors, Assemblyman Pretlow and Senator Bonacic, as well as the hundreds of thousands of New York fantasy sports fans who made their voices heard through emails, social media, and phone calls to let their legislators know they love DraftKings and want to see their favorite hobby return to New York. We are grateful for your loyalty and hard work in helping get this bill passed. You made all the difference.”
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