Ohio is the newest state to join the consideration of the daily fantasy sports industry, with things ramping up quickly in recent weeks.
An attorney general memo cropped up that was largely noncommittal about the industry’s legality vis a vis state law — and a new bill was introduced this week.
There were a lot of victories for the DFS industry — or at least for the top operators DraftKings and FanDuel — in 2016. Eight states passed laws that legalized and regulated DFS this year.
However, there were just as many places where efforts to generate legal clarity were sidetracked or abandoned. This is to be expected, of course, as getting laws passed in any state can be a challenge, especially on an issue like DFS that can be at least somewhat controversial.
But the microclimate in Ohio points to the idea that the legalization and regulation of the DFS industry is not a foregone conclusion in every jurisdiction, as the dynamic of politics in each state can vary wildly.
It also points to why owning the narrative in each state — or at least the biggest battlegounds remaining — can be important moving forward.
The background of DFS in Ohio
There have been rumblings in Ohio for some time. Late last year, a report from the Permanent Joint Committee on Gaming and Wagering promised to look more closely at that matter, but the state government had been silent on the issue for much of 2016.
But a memo regarding the legality of DFS from Attorney General Mike DeWine surfaced recently (whole thing here.)
Unlike AG opinions in a variety of other states, DeWine’s office shied away from making a blanket statement abut the legality of DFS, while also saying “that there are legitimate concerns over how DFS websites operate”:
It is unclear whether DFS websites, as currently operating, violate R.C. Chapter 2915. Due to this lack of clarity, and the variety of laws DFS implicates, the General Assembly may want to address this issue.
The memo also is not an “official opinion” as offered in other states; it was a memo drafted at the behest of state Sen. Bill Coley.
The new Ohio bill, and Coley frames the debate
This week, Coley introduced SB 356. As opposed to legislation that we’ve seen generally designed to be friendly — or at least tolerable — to the DFS industry, Coley’s bill is anything but.
The bill seeks to call DFS a “scheme of chance.” (That stands in stark contest to the “game of skill” language that is used to describe DFS by the industry and friendly bills.)
The legislation would make illegal any contest that does not return 100 percent of entry fees to players in a contest. Some analysis of the bill as introduced here.
Here’s more from Coley via Cincinnati.com:
“When you’re taking a rake off the top, you’re breaking the law and you need to stop doing that in the state of Ohio,” said Coley. …
“They want to deny reality and they don’t want to change their model because it’s very profitable,” he said. “We’ve crafted legislation so all those in Ohio who are interested in fantasy sports continue in these activities.”
The former statement is obviously very much up for debate in Ohio, given the AG memo. The latter statement isn’t terribly accurate, as it would shut down pretty much the entire DFS industry as currently situated, if passed. Nearly all sites run on the model of taking a “rake” — or a portion of all entry fees — when running contests.
Framing the debate on DFS is helpful, but not always necessary
What we’ve seen in the past year on DFS legislation is there is no set script for getting a bill to the finish line. The DFS industry has passed legislation:
- In friendly climates with little pushback (i.e. Virginia and Massachusetts)
- States with AG opinions on the book saying DFS was illegal gambling prior to a law being enacted (New York, Tennessee and Mississippi).
But for the success in those last three states, there were also several where the DFS industry lost control of the narrative on DFS being a game of skill or chance, and whether the state should be legalizing it.
Promising efforts in states like Illinois, Minnesota, Georgia and Oklahoma all found stumbling blocks this year.
Coley’s bill as the starting point for a discussion for DFS is far from ideal for the industry. But the starting point of DFS being called illegal gambling wasn’t a non-starter in several states, either.
DFS legalization has found considerable momentum this year. Keeping that momentum can be helped by framing the debate in positive terms anywhere DFS is considered. The success in states like New York belies the degree of difficulty in overcoming the disadvantageous starting point.
We’ve yet to see a bill passed anywhere — or even make noticeable progress — that effectively makes paid-entry DFS illegal.
Ohio may seek to buck that trend with Coley’s bill, and it could test how palpable the momentum behind DFS is right now. If it can be turned aside by industry lobbyists or other lawmakers in the state, that’s certainly a good sign for any state with vocal DFS opponents.