Daily Fantasy Sports Legalized in New York
Description:
Daily fantasy sports contests are now legal in New York state under legislation signed into law today by Gov Andrew Cuomo, the eighth such state since January to give some level of lawful backing to the online gambling sector.
The measure, which pitted DFS operators and their financial backers against some casino and racetrack-based racinos, adds new regulatory oversight of the industry by the state Gaming Commission and imposes new taxes on operator revenues.
The law ends a legal dispute, first commenced last year by Attorney General Eric Schneiderman, which shut down the industry in New York for much of the year. Schneiderman said this evening he will enforce the new law, which includes new consumer protections, but that he is still pursuing false advertising and consumer fraud actions against DraftKings and FanDuel. The two companies control an estimated 95% of the nation's DFS industry.
The new law takes effect immediately, though it is uncertain when the contests will return. Gaming Commission officials said it is up to DFS operators to fill out online applications and meet the legal requirements in order to be granted temporary permits. The agency will promulgate rules to regulate the industry and then, sometime possibly this year, be in a position to grant what the law envisions as operating permits issued for three years at a time.
The law bans DFS contests from being offered on horse racing and collegiate sports events. The state expects to take in some $4 million a year, at least for now, in new taxes imposed on operator gross revenues.
“Daily fantasy sports have proven to be popular in New York but until now have operated with no supervision and no protections for players,’’ Cuomo said in signing the bill. “This legislation strikes the right balance that allows this activity to continue with oversight from state regulators, new consumer protections and more funding for (state) education.’’
The measure led to a bruising lobbying battle. On one side were some New York racetrack racino operators, who joined forces with some new commercial casinos under construction in New York, as well as Las Vegas and Atlantic City casino companies, to press for a bill to legalize online poker. That measure died. The group also pushed for legislation requiring daily fantasy sports licenses be issued to bricks-and-mortar casinos, not to the online companies like DraftKings and FanDuel. That idea also died in a bitter fight that ended with the sponsors of the daily fantasy sports measure characterizing the racino and casino industry plans as greedy.
The legal battle in New York focused on whether the contests amounted to illegal “games of chance,’’ which, with specific exceptions, are not permitted in the state. Schneiderman and the two big DFS operators agreed to pause their court fight in March to see if the Legislature and Cuomo would legalize the contests; in return, the two companies agreed to halt doing business in the state until the issue was resolved, or not, in the Legislature.
The final deal that became law ends the “games of chance” dispute by legally declaring the contests to be “games of skill,’’ and therefore permitted in New York.
The industry claims there are more than 3 million DFS players in New York. Critics say the DFS legalization will create more compulsive gamblers and lead to additional forms of internet wagering in the years ahead.
Assemblyman Gary Pretlow, chairman of the Assembly racing and wagering committee, said the new law allows DFS operators to do business in New York “while ensuring fans have a safe environment to play in.’’
“I believe this legislation can serve as a model for the rest of the country,’’ added Sen. John Bonacic, chairman of the Senate racing and wagering committee and co-sponsor of the bill with Pretlow.