After clearing the House with ease, the fate of daily fantasy sports legislation in Ohio now sits in the state Senate.
H 132, a bill from Reps. Jonathan Dever and Rob McColley, was one of the items on the docket for today’s Senate Finance Committee hearing in the capitol. That hearing did not result in a vote on the legislation.
Real action is expected soon, though. From Crain’s Cleveland Business:
Dever is hopeful the legislation will make it to the floor of the Senate before Thanksgiving, and be enacted in the first quarter of 2018.
An industry lobbyist earlier said that the state was likely to pass a bill this year. If a bill gets to the finish line, it would be the second top-10 state in terms of population to enact fantasy sports legislation, joining New York.
The history of DFS legislation in Ohio
This week marks the one-year anniversary of the introduction of the very first fantasy sports bill in Ohio.
The conversation was initiated by a memo from Attorney General Mike DeWine. Providing no opinion of his own, DeWine suggested that the state’s General Assembly address the lack of clarity for paid-entry fantasy sports through legislation:
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.
2016: Competing bills lay the groundwork
Shortly thereafter, Sen. Bill Coley introduced S 356, and it wasn’t exactly friendly to the industry. Coley classified fantasy sports contests as “schemes of chance” and sought to prohibit both the operation of and participation in contests for profit.
The bill would have allowed for some regulated contests, but only those that returned 100 percent of entry fees to users. That model excluded DFS operators, most of whom rely on rake as their primary source of revenue.
Later that year, Sen. David Burke tried his hand with the introduction of S 375. Co-sponsored by Sen. Cliff Hite, his proposal cast the industry in a much more favorable light.
Burke’s bill aimed to amend Ohio’s gaming law, carving out an exemption for fantasy sports contests. It cited the “relative knowledge and skill” of users, a refreshing pivot from Coley’s words. Burke’s distinction was explicit.
The bill laid out a laundry list of built-in consumer protections and proposed to give operational oversight to the Ohio Casino Control Commission. It stipulated that operators pay a $30,000 fee for a three-year license, with the same terms for renewal.
The legislative calendar had run out for 2016 by that point, but the competing bills set the stage for a potential face-off in 2017.
2017: Hammering out the details in the House
Entering the new legislative year, industry lobbyists were bullish on the potential for favorable movement in Ohio. So far, things seem to be trending that way. It’s the House that’s taken the lead this year, though.
In March, Reps. Dever and McColley introduced H 132. As with Burke’s offering, this bill was designed to give the OCCC jurisdiction over the fantasy sports industry within the state.
Much of the language was the same, with one notable exception. Sections regarding licensing fees were retained, but the numbers were softened a bit. The new proposed fees were “not to exceed $10,000” annually, leaving room for the Commission’s discretion.
On May 24, the House passed the bill by a vote of 82-15 and sent it to the Senate. It’s currently on the desk of the Finance Committee there.
Speaking of the Senate, Burke reintroduced his bill again in 2017, too. The updated Senate bill follows the House’s lead on licensing fees and other language, and it’s also in committee.
Coley’s less-friendly bill has not been reintroduced, nor has any competing legislation against S 153.
Highlights of the current bills
Here are the main talking points from both H 132 and S 153:
- $10,000 maximum annual licensing fee: Each state has set its own bar for entry into the DFS space, and Ohio’s proposed fees are among the least stringent. Virginia, for example, requires operators to pay $50,000 annually. Large fees create significant hurdles for small DFS operators and threaten to stifle a blossoming subset of the industry. Ohio’s sliding scale should be attainable for all, with the smallest operators likely paying the smallest fees.
- No operational tax: Setting excessive tax rates is another way that some legislators are choking out operators big and small. The laws of New York and Delaware include a baseline remittance of more than 15 percent. Ohio’s proposed bill does not include an additional tax and is not intended to turn the industry into a source of state revenue. Licensing fees are to be collected to cover the costs of regulation and enforcement.
- Consumer protections: The proposed legislation seems to contain all of the necessary clauses for the protection of the people of Ohio — things like age verification, self-exclusion, and segregation of funds. It also includes provisions for widespread checks on operational integrity and bookkeeping habits. Under the bills’ terms, users must be at least 18 years old to play.
- Prohibition of kiosk-based contests in retail locations: This is one of the few blemishes on the bill and something that will hopefully be reconsidered. Brick-and-mortar DFS contests are just starting to take shape from innovators like EagleStrike, and the requisite consumer protections are already in place. Some hopefuls see in-person DFS as a keystone in the industry’s future. Closing off this avenue for fantasy players and operators seems counterproductive to the end goal.
Bespoke legislation is the best legislation
So far, there is no cookie-cutter template for the successful passage of a DFS bill. Some of the current laws have been borne out of support for the industry, while others emerged out of contentious skill-versus-luck debates. Most have followed the same basic template as advanced by lobbyists for DraftKings and FanDuel.
Virginia became the first state to pass DFS legislation last year, and 15 other states have since followed suit. A handful of others have active bills on the table, including Ohio’s neighbors Pennsylvania and Michigan.
Ohio’s proposal is particularly attractive, though.
For starters, it is a standalone piece of legislation. That’s encouraging by itself. Pennsylvania’s proposed regulations, for example, have been wrapped up in bumbling budget discussions for years.
Everyone benefits from legalization and regulation
DraftKings and FanDuel are two of the biggest proponents of state-based legislation. But the benefits of having clear laws on the books extend to the little guys, too. Lawmakers help level the playing field for DFS startups when they put ink on paper.
New York’s Boom Fantasy and Virginia’s EagleStrike provide two recent case studies, and there are plenty more like them working to gain a foothold. State legislators are always keen on nurturing local business, and a regulated DFS industry opens up a lot of possibilities for entrepreneurs.
Peter Schoenke, the chairman of the Fantasy Sports Trade Association, is a vocal proponent of a competitive DFS marketplace. He explained the Association’s viewpoint in talking with Crain’s Cleveland:
We want a law that makes it legal and adds consistency for our profession. Our members don’t mind if our industry pays for that cost. We just want the system to have no barriers for entry — so the smaller companies out there can continue to operate, and others can come in without paying a huge fee.
Clear DFS legislation helps foster those second-tier businesses and provides an avenue for their potential entry into the marketplace, too.
