New York Regulator: Prop-Style Fantasy Markets ‘Essentially Sports Betting’

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Fantasy Sports

New York gaming regulators say daily fantasy sports contests mimicking player prop bets are “essentially sports betting.”

In an Aug. 2 Register update, the New York State Gaming Commission rejected a commenter’s request to change proposed DFS rules to allow the pick ’em-style player games popularized by PrizePicks and Underdog Fantasy. It is the fourth state regulator since May to crack down on player vs. house fantasy games resembling prop bets offered by sportsbooks.

A commenter objected to proposed Rule 5602.1(a)(4), which would make explicit that contests shall not be based on proposition betting or contests that have the effect of mimicking proposition betting. The Commission believes that a contest offering that is essentially sports betting, which is authorized for licensees and regulated pursuant to Racing Law Article 13  (not Article 14), cannot properly be characterized as IFS simply because an operator labels it as such. 

New york state register, regarding Comprehensive Regulations for Interactive Fantasy Sports

No answer from fantasy trade group

No hearing was scheduled for the proposed rules, which may be finalized after the comment period that runs through October 3.

The Fantasy Sports & Gaming Association, the only trade association to submit a comment on the proposed rules, did not respond to LSR‘s request for comment. Representatives for PrizePicks and Underdog, New York’s largest pick’em operators, did not respond to multiple requests for comment. Both companies defend their games as legal under the federal UIGEA skill-based carveout for fantasy sports.

New York joins fantasy sports inquiries

Wyoming regulators sent PrizePicks and Underdog cease-and-desist letters on July 5. The letters deem their pick’em contests as “the exact definition of sports wagering” and lay out penalties for operating without a license, including jail time and millions of dollars in fines.

Each company’s response was due by July 19, though neither PrizePicks nor Underdog acknowledged receiving the letters. They offered no further comment.

Meanwhile, Maine regulators sent Underdog a notice of complaint regarding unlicensed sports betting last month. Ohio is investigating five fantasy sites.

Fantasy sports, sports betting clash

As rules governing sports betting vary by state, so too do rules for fantasy sports. The difference between being classified as either can mean millions of dollars in taxes, legal fees, regulation, marketing restrictions, and how young users can be.

Last month, Cesar Fernandez, FanDuel head of state government relations, expressed frustration with what he described as “illegal sportsbooks” posing as fantasy sports operators. Alongside DraftKings, FanDuel is considered the first pioneer of DFS, though neither company offered pick’em games described as fantasy.

Underdog, PrizePicks respond

The Coalition for Fantasy Sports, representing Underdog and PrizePicks, provided a statement earlier responding to Fernandez’s comments:

“It’s unfortunate DraftKings and FanDuel, the same companies that championed fantasy sports as skill-based for years, have changed their tune at the first sign of competition. It’s a thinly veiled attempt to create a false narrative and position themselves as the only games in town.

“The current legal framework exists largely because of the efforts of these industry incumbents. Unable or unwilling to compete on product, they’re doing what incumbents often do when faced with new competition. The narrative they’re spreading directly contradicts the laws they helped to write and pass – laws that make crystal clear that fantasy sports are not sports betting. Their anti-competitive approach is disingenuous and is bad for consumers.”