A breath of fresh air for the daily fantasy sports (DFS) industry. A bill that would regulate the DFS industry in New York has been approved by the state Assembly and the Senate. The bill now goes to Governor Andrew Cuomo for his signature. He has ten days in which to do so.
All signs point to Gov. Cuomo signing the bill. Eligibility for temporary permits will be retroactive for any DFS websites that were active in New York on November 10, 2015. That was the date New York Attorney General Eric Schneiderman issued a cease and desist order for all DFS operators in the state. There’s no word yet on when these temporary permits will become available.
This is outstanding news for the two biggest players in the fantasy sports industry, DraftKings and FanDuel. Both companies had halted operations in New York in March 2016 after working out a deal with AG Schneiderman. The upcoming NFL season is the prime money maker of the year for DFS and New York is the single largest state market for DFS. The new bill defines daily fantasy sports as the industry had hoped for – that DFS are games of skill rather than chance. Had that stipulation not been included, the door would be left open for anti-DFS groups to challenge the law’s constitutionality on the premise that the games are based on chance, which defines illegal online gambling.
Licensing fees for the online sports games will be 15% tax on revenue generated from New York players, plus an additional annual 0.5% tax that can’t exceed $50k. This is considerably less than fees originally proposed by legislators. The new bill spells out consumer protections such as warnings for compulsive play, no wagering on college events and highly experienced players must be identified in order to protect less experienced players from being taken advantage of. DFS advertising and websites will be required to make “clear and conspicuous statements that are not inaccurate or misleading” about chances for winning.
Even with legalization for DFS, AG Schneiderman has indicated that he will continue with separate law suits contending “false advertising and consumer fraud” against DraftKings and FanDuel.
With FanDuel and DraftKings currently in merger negotiations, it will be interesting to see if the legislation will have any bearing on the possible merger. The whole premise for a merger really had to do with stemming the bleeding that both companies were experiencing because of legal battles over regulation. It stood to reason that one company could fight the same battles for less cost. With New York opening up, that could possibly set the stage for other states to follow suit and the two industry giants could divest themselves of expensive legal battles, and maybe calling off a merger.