March 5 -- Net Neutrality
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The daily fantasy sports industry had a few wins this spring in its first full year of pushing to make its games explicitly legal across the country. And while the question of whether the games are legal remains unclear in much of the nation, and their future up in the air in some of the biggest states, proponents of the games say the industry is in a period of positive momentum that’s likely to continue.
Seven states have enacted laws this year to specifically allow players to compete daily for prize money by picking fantasy sports teams. That includes New York, which became the latest to okay the games when Gov. Andrew Cuomo (D) signed AB 10736 last Wednesday. The Empire State joins Colorado, Indiana, Mississippi, Missouri, Tennessee, and Virginia as states that this year made daily fantasy sports, or DFS, explicitly legal. And just last week lawmakers in Massachusetts unexpectedly legalized the games as part of a larger economic development bill sent to Gov. Charlie Baker (R). Kansas enacted a broad gambling bill last year that clarified that DFS is legal there.
That looks like a good start for an industry – led by the two major DFS companies, DraftKings and FanDuel - that only embarked within the last year on a nationwide effort to make sure the new games - which are murky as to whether they are technically gambling - are allowed to continue. About 57 million people in North America already play daily fantasy sports, and the stakes are high. According to research by consulting firm Eilers Research cited in a California Senate analysis, DFS could generate more than $370 million in revenue this year, and could easily top $1.5 billion in the next few years.
Still, the majority of states are yet to act. And the industry hasn’t locked in its future viability in some of the states with the largest potential customer bases, including Florida, Illinois and California.
Florida lawmakers this year failed to act on a proposal to make it clear the games are legal there. In Illinois the question of their legality is mired in litigation. And in California lawmakers continue to consider the idea, but it has gotten tangled up with a separate push to allow other kinds of online gambling.
Americans have long played fantasy sports - “drafting” teams of real players and matching the statistics of their drafted players against real stats piled up by players on other fantasy teams. But internet-based “daily” fantasy sports burst on the scene last year, letting players cash in on how their picks did in a game, as opposed to a full season. That, in some eyes, looks like betting on sports.
Policy makers got interested in the games over the last year or so with an explosion in the number of players fueled by a publicity spree last fall by DraftKings and FanDuel. There’s a hodgepodge of opinions about their legality, leading the two companies to go on offense, seeking to have the games explicitly declared legal state by state. The push came against a backdrop of opinions trickling out from various state attorneys general on whether DFS should be considered legal under current laws.
Lawmakers have weighed in as well, with more than 25 states having considered legislation in the past two legislative years dealing with fantasy sports, with most seeking to legalize and regulate them.
Currently, in addition to waiting for New York’s governor to act, the industry is most closely watching California, where a bill (AB 1437) to legalize and regulate DFS passed the Golden State’s Assembly 98-1 back on Jan. 27, but remains in committee in the Senate.
California, which may account for as much as 15 percent of the overall national market for the games, is important to the industry, but the proposal to legalize DFS there faces a short time frame, with leadership in no hurry to move the bill in its first year. California lawmakers recess Aug. 31.
The DFS measure has also gotten wrapped up in an initially separate legislative debate over internet poker. Both bills are being pushed by Assembly member Adam Gray (D). His spokesman, Trent Hager, said Gray wants to pass both bills this year.
“They’re complimentary bills - legislation to protect consumers and increase oversight and accountability,” said Hager. “It’s completely the wild west here with no consumer protections.”
So while the DFS bill is ready for Senate committees to act, Gray is waiting for the internet poker legislation to pass the Assembly. “We remain hopeful they’ll both move forward this year,” Hager said.
But Senate President pro Tem Kevin de Leon (D), while not taking a position on the DFS bill, told reporters last week he “is in no rush” to address the issue either. The California measure also may be hampered by not having a gaming stakeholder, such as a racetrack or Indian casino operator, as a partner in the effort said Vincent Oliver, a gaming law attorney in California who has followed the issue.
The backers of the idea appear to have “a lot of work in a short period of time,” he said.
But the DFS industry remains hopeful.
“We are optimistic that this important legislation that establishes consumer protections to a growing and popular industry will move forward in the remaining days of this year’s legislative session,” said Steven Maviglio, a spokesman for the fantasy sports companies working on the bill in California.
DFS also got wrapped up in a tangential gambling issue in Florida that may well come up in other states - whether allowing DFS would amount to an expansion of gambling that would have ramifications for state compacts with Indian tribes that own casinos.
That’s also come into play in California, where leaders of two tribes, the Morongo Band of Mission Indians and the San Manuel Band of Mission Indians, wrote to Gray back in the spring questioning whether the games might violate the state Constitution’s granting of exclusive rights for certain types of gambling to tribes.
The legality question for DFS is also in flux in Illinois, where a bill to legalize the games failed to get to the House floor after passing the state Senate. Illinois Attorney General Lisa Madigan (D) had previously said that she considers the games illegal in Illinois, and DraftKings and FanDuel have also gone to court seeking to have the games declared legal.
Illinois and Florida represented the biggest setbacks to DFS companies and players this year. Still, while some in the DFS industry were worried as recently as late last year that the industry might be in trouble, backers of the games now clearly are optimistic that the push for broader legalization will be successful. The effort is almost certain to resume in Illinois and Florida, and lawmakers in Pennsylvania this summer are also considering a package of gambling issues that could include DFS legalization and regulation. In addition to the seven states where DFS has been explicitly legalized, a few states consider the games legal under existing laws.
Chris Krafcik, the research director at consulting firm GamblingCompliance, which monitors the legal landscape surrounding the gaming industry, said the momentum has started and is likely to keep going.
“Absent events — such as litigation or enforcement action — that would disrupt or derail the daily fantasy industry, we expect that multiple states will enact legislation to regulate daily fantasy contests in the coming years,” Krafcik said. “In our view, it’s reasonable to expect that in 2017, at least as many states will enact daily fantasy regulatory bills as did this year.”
-- By SNCJ Correspondent David Royse