DraftKings, FanDuel Beat The Clock In New York: Legislature Passes Fantasy Sports Bill

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DFS New York Bill

The New York legislature passed a bill legalizing and regulating the fantasy sports industry early on Saturday morning, in what might be the beginning of the end a months-long legal battle in the state.

The daily fantasy sports bill — passed on the final day of the legislature’s session — still needs the signature of Gov. Andrew Cuomo to become law in New York.

If signed, FanDuel, DraftKings and other fantasy sports sites will be able to operate again in New York, as part of a settlement with NY Attorney General Eric Schneiderman.

Earlier in the day, the Assembly passed the legislation by a wide margin.

High drama for DFS in NY

The prospects of the Senate version of the bill had been in doubt until reports came from a meeting of Senate Republicans at about 9 p.m.

At that point, the bill’s sponsor, Sen. John Bonacic, indicated to media at the statehouse that he had the votes to pass it. Concerns over having the necessary votes for a majority had been holding up the bill even as the Assembly passed its own version.

The bill — S 8153 — was eventually passed 45-17 after 2 a.m. as the legislature worked on a variety of other issues at the end of the session.

The media in Albany classified the legislative effort as a brutal lobbying battle largely pitting DraftKings and FanDuel against casino interests in the state.

The governor’s turn on DFS

Once the legislation is formally presented to Cuomo, he will have 10 days to either sign or veto it.

If he does neither of those things, the bill would automatically become law.

Cuomo was involved in helping craft some of the final details of the bill. However, the DFS legislation was not a part of a wide-ranging deal announced between Cuomo and the legislature, so it’s at least possible his signature is a variable in play.

The Assembly vote of 91-22 was veto-proof — a two-thirds majority would be needed to override a veto. The margin in the Senate is also veto-proof, if it can be maintained.

DraftKings, FanDuel reaction

FanDuel and DraftKings both hailed the passage of the legislation. From FanDuel CEO Nigel Eccles, in a statement from the company:

“New York fantasy sports fans rallied – with more than 100,000 emails and thousands of phone calls to legislators – and legislators heard them and responded. The bill represents a thoughtful legislative process, where bi-partisanship and willingness to compromise carried the day, and we are extremely hopeful Governor Cuomo will sign this bill. We decided long ago to build FanDuel in New York because it’s the sports capital of the world and a thriving home for tech startups – a natural fit for fantasy sports. Our success is due in no small part to the people, infrastructure, partnerships and opportunities here, which very few locations in the world can offer.”CEO Jason Robins:

“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.”

Details of the NY DFS bill

What’s in the final version of the bill that passed?

Registration and oversight for operators

All paid-entry fantasy sports operators wishing to do business in the state must apply with the New York State Gaming Commission.

Registrations are for three years, and the commission would put into place a process for registration renewal. Background checks of applying companies’ officers is required.

The commission is given the power to promulgate regulations to put the law into effect.

Operator taxes

Registered sites in the state must pay a 15 percent tax on gross revenues derived from New York players, plus an additional tax of 0.5 percent of revenues, with a $50,000 annual cap.

The revenue goes to the state’s lottery fund, which is used to fund public education.

Consumer protection

There are a variety of consumer protections instituted by the bill:

What is ‘fantasy sports’ under the bill?

According to the bill, this is the definition of an “interactive fantasy sports contest”:

…a game of skill wherein one or more contestants compete against each other by using their knowledge and understanding of athletic events and athletes to select and manage rosters of simulated players whose performance directly corresponds with the actual performance of human competitors on sports teams and in sports events.

A fantasy sports contest must (language directly from the bill):

While the core definition would seem to line up with fantasy sports as traditionally offered — including “managing rosters” — the rest of the language could be construed to allow something akin to prop betting. How the NYSGC promulgates regulations may clear this up.

No college contests

In line with laws passed in other states, operators cannot offer contests based on any amateur athletic event, including college sports.

Also excluded: fantasy contests based on horse races.

Not gambling

Fantasy sports “do not constitute gambling in New York state” under the penal code, according to the bill.

There is some concern that the law could come under a challenge under the state’s constitution — it was brought up as a concern during Assembly debate — which narrowly defines the types of gambling that are allowed in the state.

It’s not clear where such a challenge would come from, however. The bills’ authors, Pretlow and Bonacic,  believe the legislature’s language that fantasy sports contests are a game of skill stands up to scrutiny.

When can fantasy sports sites start operating again?

Once the bill becomes law, its provisions become effective immediately. Operators must receive a “temporary permit” to offer contests, and must make an application for registration with the state.

Sites that were in operation before November 10, 2015 — when Schneiderman issued his cease-and-desist orders — are eligible for the temporary permit.

The bill says the gaming commission shall offer the temporary permits, but doesn’t say how quickly the process will happen.

So, we could still be weeks away from FanDuel, DraftKings and everyone else being up and running in New York again.

Other states that have passed DFS legislation in 2016

New York becomes the seventh state legislature to pass a bill regulating DFS this year. The others?

Governors in all those states have signed the bills into law.

Massachusetts Attorney General Maura Healey enacted regulations overseeing the industry under the powers of her office this year, as well.