New Daily Fantasy Sports Legislation In Pennsylvania Would Create Highest Fee, Tax Rate In US

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New PA DFS bill

Legislation that a state senator plans to introduce in Pennsylvania would create a licensing fee and tax rate that far outpaces any law aimed at daily fantasy sports in the US.

What the PA legislation will do for DFS

PA state Sen. Jay Costa announced his plans for legislation on a host of gaming issues in a memorandum of co-sponsorship. The legislation will tackle online gambling and land-based casino taxes, as well.

But another key component are provisions that would legalize and regulate DFS, while also creating licensing fees and taxes for operators. Here is what the memo says:

The bill will also authorize daily fantasy sports games in the Commonwealth. A license fee of $2.5 million will be imposed. Daily fantasy sports revenues will be taxed at a rate of 25%, and all tax revenues will be deposited into the State Lottery Fund.

The memo notes that it counts on $5 million for the state from two such licenses being procured. Presumably, Costa is assuming both DraftKings and FanDuel would pay the licensing fee.

Would anyone want to be licensed in PA?

This is the obvious question upon seeing the basic setup for DFS operators in the Keystone State, under Costa’s plan.

No one is going to pony up $2.5 million for DFS other than DraftKings, FanDuel, or the ensuing merged DFS platform. And even if they could afford it, they likely don’t want to set the precedent of agreeing to such an exorbitant rate.

No state has set a DFS licensing fee anywhere near $2.5 million, let alone seven figures. The 25% tax rate would be the highest tax rate, by far, of the states that tax DFS revenue. The only ones close are New York (15.5%) and Missouri (11.5%)

(The above analysis does not take into account Nevada, where no traditional DFS operator is licensed.)

What’s next for DFS in PA?

Costa’s bill could amount to a non-starter for legal DFS in the state, if those numbers are set in stone. But this is far from the first time DFS regulation has been considered in PA. This is not likely to be end of the discussion as the bill moves its way through the legislative process.

Of course, most DFS operators already serve PA users without explicit legalization. So a bill that would force most of them out will likely face pushback.

What does appear to be certain is that DFS legalization in PA continues to be tied to online gambling and a larger gambling expansion. And that is unlikely to change in the foreseeable future.