New York passed legislation legalizing and regulating daily fantasy sports over the weekend, a last-second victory that will have a wide-ranging impact on the industry.
One of those ramifications? It’s possible this changes things in other states, and leads to a wave of action in other legislatures. Assuming Gov. Andrew Cuomo signs the bill, what could this mean for the DFS regulatory efforts elsewhere?
The case for NY building DFS momentum in other states
New York, many believe, set the dominoes falling for the DFS industry last fall, in a negative way. There are definitely arguments that New York changing its tune could lead to change elsewhere.
Well, if Schneiderman cleared a path…
In the wake of the DraftKings data leak, NY Attorney General Eric Schneiderman started taking a closer look at the DFS industry. That came about a month before the now infamous cease-and-desist orders that he issued to FanDuel and DraftKings in November.
But later on, he entered into a settlement with the top two DFS sites, essentially clearing the way for the legislature to make DFS legal.
Schneiderman was by far the loudest and most high-profile official to take aim at DFS — other than perhaps New Jersey Rep. Frank Pallone. The logic here says that if a relative measure of detente can be reached with someone portrayed as the biggest villain in the DFS struggle, then a path forward can be found almost anywhere.
Of course, he is still looking to mix it up in court with DraftKings and FanDuel. His office issued this statement in the wake of the legislature’s action:
“As I have said from the start of my office’s investigation into daily fantasy sports, my job is to enforce the law. 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.”
Anti-DFS lobbying efforts were overcome
The DFS industry encountered relatively little in the way of coordinated lobbying efforts against legalization in most states.
Of the states where DFS bills were considered, Illinois is one of the few places where such a lobbying effort actually derailed legislation. In that state, the casino industry pushed for a bill that would have tied DFS to land-based casino licensees.
(Concerns about tribal gaming compacts and their intersection with DFS has cropped up in many states, as well, although how much of that can be attributed to lobbying is unknown. In Oklahoma, it made a difference.)
The same argument was pushed in the Empire State, as the New York Gaming Association — representing the state’s racinos — actively tried to stop the DFS legislation as it was written.
While the lobbying effort certainly impacted the wrangling in the statehouse, it ultimately was not successful; the DFS bill was passed over the NYGA’s protests.
Thus, the DFS industry can get bills done even in an unfriendly environment — something it may need to do again.
Copying is easy
A lot of the heavy lifting has already been done on DFS regulatory approaches. And the final New York legislation, in many ways, is better than most in the oversight it provides for the industry.
States now have a ton of language and bills they can lift language from, and New York provides one more example of a workable template that can be applied by other states.
New York’s a big state
There had been legislative momentum in a lot of states this year: Six governors have signed bills into law regulating DFS.
But none of those states — Colorado, Missouri, Indiana, Virginia, Tennessee and Mississippi — are of the size and importance of New York.
The states that are considering legalizing DFS usaully point to the ones that passed laws before it. While the victories in the above states are worth noting, the weight of New York’s action could trump all of those combined.
The case against NY building DFS momentum in other states
On the other side of the coin, there are reasons to think the New York legislative effort will not reverberate in other states.
Legislatures are pretty much done until next year
New York’s move to legalize DFS is not going to set off an instant tidal wave of regulatory efforts.
That’s mostly because of the legislative calendar around the country. A majority of legislatures in the US have already adjourned for the summer, and aren’t coming back until after the November elections.
Of those, there are only two states that seem to have any sort of legislative momentum right now: Pennsylvania and New Jersey. And those two states have been taking their own, sweet time on DFS legislation, and don’t seem inclined to be affected one way or another by the happenings in New York.
While New York could have an impact in the long run, that impact may have to wait awhile.
Lawmakers aren’t that well-informed
From watching lawmakers in a variety of states, this much is clear: A lot of them know terribly little about DFS.
A run-of-the-mill state-level lawmaker has little sense of how playing DFS works, and has little idea about how the industry is currently situated.
For the people not really following any of the drama around the industry, does New York doing something about DFS move the needle? It could provide some weight on the scale, for reasons addressed earlier, but it’s not necessarily a gamechanger for state legislators that have little idea what’s going on with the industry.
Each state is different
Another piece of insight gleaned from watching committee hearings and legislatures: Each state is a snowflake.
That’s why state-specific lobbyists are deployed by the DFS industry everywhere that legislation crops up, because the micro-politics of each state can vary wildly. What works in one state might not work in another.
(Attorneys general followed New York’s lead in a variety of cases, mostly because state gambling laws can often be similarly applied to DFS.)
The debates over DFS have varied from state to state. In some states, the narrative that people should be able to do what they want and that DFS is a game of skill wins out. In others, DFS regulation is painted as an expansion of gambling and not worth the legislature’s time when there are more pressing concerns.
The bottom line: Action in one state does not mean action in another.
What will NY mean for DFS?
It’s clear that New York legalizing DFS would have a non-zero impact on the rest of the country.
How much impact? That’s difficult to say. A number of states likely will still formally legalize and regulate DFS in the coming years, and may have done so regardless of what New York did. The New York push could change some key lawmakers’ minds, certainly. The impact might not even be visible, but used behind the scenes in lobbying efforts.
Regardless, right now, the DFS industry is happy to have any victory on its side of the ledger. And the ramifications of a New York win are far better than a loss.
