NY Lawmakers Legalize Daily Fantasy Sports

New York lawmakers gave final passage early June 18 to a measure legalizing daily fantasy sports contests, which have been attracting a growing worldwide audience among sports fans and gamblers.

The industry claims it has more than three million customers in New York.

The measure had been fought against by some New York racetracks that also operate casinos; they had argued that the contests will cannibalize some of their customers in a state that has seen an explosion of state-sanction gambling in recent years.

Supporters in the legislature wrestled all week to try to line up support against an onslaught of opposition by the New York Gaming Association, which represents tracks with video lottery terminal operations as well as other casino companies from upstate New York to Las Vegas.

"You're going to make a lot of New Yorkers happy," Sen. John Bonacic, a Republican who sponsored the bill in the Senate, told his colleagues shortly after 2 a.m. The surprisingly brief floor debate belied the level of intensity of the fierce lobbying battles that have raged in the state capital the past couple of weeks.

The Senate passed the bill 45-17, while it cleared the Assembly June 17 by a 91-22 vote. The measure now goes to Gov. Andrew Cuomo for consideration; he has not definitively signaled his intentions, though Bonacic on the Senate floor said Cuomo backs the legislation.

The legislation bans daily fantasy sports contests in New York from being offered on horse racing or collegiate sports events.

New York Attorney General Eric Schneiderman last fall ordered FanDuel and DraftKings, the two biggest daily fantasy sports operators, to stop operating within the state's borders. He said the contests amount to illegal forms of gambling not permitted in New York, and that the companies were engaged in a business to "fleece" customers.

The two companies dismissed his charges and said their offerings are permissible in the state. The sides ended up in court, though that process was suspended while the legislature weighed whether it wanted to address the issue.

Schneiderman the morning of June 18 didn't come out in opposition to the measure.

"As I have said from the start of my office's investigation into daily fantasy sports, my job is to enforce the law," he said. "Today, the legislature has amended the law to legalize daily fantasy sports contests, a law that will be my job to enforce and defend. We will nevertheless continue to pursue our claims that DraftKings and FanDuel previously engaged in false advertising and consumer fraud.''

Critics claim the fantasy sports operators represent a threat to other gambling industries in New York, including pari-mutuel horse racing, racetrack-based VLT operations, and the Las Vegas-style casinos now under construction in three upstate areas. Some of the racetrack casinos wanted the bill killed unless existing and future casinos in New York were given the licenses to operate the contests.

Proponents said there are about 30 fantasy sports companies that have been doing business in New York, and that the racetracks and casinos only began complaining about potential revenue hits from fantasy sports after Schneiderman launched his legal challenge. Bonacic recently called the racetrack casinos "greedy."

FanDuel, in a statement, said New York is the seventh state to pass legislation to legalize daily fantasy sports. The industry has come under legal challenges in a number of states over whether its contests are an illegal form of gambling.

The New York legislation includes some consumer protections, bans criminal background check requirements of certain executives at the DFS companies, and requires operators to pay a 15% annual tax on the proceeds of their business in New York, along with an additional tax of up to $50,000. It directs those proceeds to the state's public education funding pot, a last-minute bow to win over some reluctant lawmakers. It also lets the New York State Gaming Commission audit the fantasy sports companies.

Opponents said the measure is loophole-ridden; they believe a ban on play by teens under age 18 is unenforceable. They also argued that the legislature does not have the authority to decide what is or is not a legal form of gambling, and that an expansion requires voter approval in statewide in a constitutional amendment referendum.

"You've got to tie yourself into a pretzel to somehow say that this is not gambling," said Assemblyman Thomas Abinanti, a Westchester County Democrat who opposed the bill.

But the Assembly Racing and Wagering Committee chairman Gary Pretlow, who sponsored the bill, told lawmakers the legislature has authority to define what activities are legal in New York as defined by the constitution.

"We as a legislature can today say that wearing a yellow tie is illegal," he said to a lawmaker wearing a yellow tie during the Assembly floor debate.