[toc]Another day, another legislative win for the daily fantasy sports industry, or at least for the lobbying effort led by DraftKings and FanDuel.
Pennsylvania became the 17th state to formally legalize paid-entry fantasy sports with a new law, and the latest to offer regulations overseeing the industry.
DFS was part of a sweeping gaming package just signed by Gov. Tom Wolf that also included online poker and gambling.
The law also seeks to legalize sports betting in the state, should the federal climate change to allow it. More on that portion of the bill here.
What’s in the PA DFS bill?
- Provides a regulatory framework for paid-entry fantasy sports, with operators overseen by the PA Gaming Control Board.
- Sets up a licensing structure, with operators paying $50,000 for five years of licensure.
- Taxes gross revenue at a rate of 15 percent.
- Institutes a number of consumer protections, such as problem gaming protocols and forcing sites to segregate player funds and operational funds.
Here is the portion of the bill dealing with DFS:PA DFS bill
Efforts to regulate DFS in PA started back in 2016, but legislation was always tied to a larger gaming package. Such a package failed to pass in 2016.
Who’s the bill good for?
Well, definitely DraftKings and FanDuel, whose lobbyists led the charge for the language that ended up in the bill.
Here’s a joint statement from a spokesperson representing both DraftKings and FanDuel:
Seventeen states have now passed a law embracing fantasy sports, and we are extremely grateful to the Governor and members of the legislature for working on behalf of the more than two million fantasy sports fans throughout Pennsylvania.
The law will serve to protect the right to play fantasy sports, ensure fantasy sports contests offered by any company are transparent and fair for customers and allow the state to court the technology companies that are emerging seemingly daily in this booming industry to locate and grow their business in Pennsylvania.
While the tax rate trends high for DFS — it matches the 15-percent rate in New York and Delaware — it’s still good for them and other operators on other fronts. Notably, sites will effectively pay $10,000 a year for a license to operate, which is fairly friendly, given PA’s size (12.8 million people).
Some aspects are tougher than other states
There are some more onerous aspects of the law that generally haven’t shown up elsewhere. Operators are required to go through a testing laboratory to ensure they are complying with state law.
And operators must also “maintain an office or place of business” within the state. Currently that covers almost no one in the space, so it will certainly be somewhat trying for smaller operators to comply. How much of a presence the law requires will likely be sorted out by state regulators.
In the end, it shouldn’t stop serious DFS operators (i.e. Draft) beyond DraftKings and FanDuel from getting into the market. Sites could ill afford to lose the liquidity offered by PA. A tax and a licensing fee for states passing laws is the cost of doing business in the DFS space these days.
The tally for DFS laws
The legislative momentum for DFS continues. Pennsylvania is the seventh state this year and 17th overall to enact a fantasy sports law. The list (2017 states in bold):
- New Hampshire
- New Jersey
- New York
The addition of PA puts the total population covered by DFS laws in the US over 100 million for the first time.
And the industry might not be done there. Connecticut (despite recent negative chatter), Illinois and Ohio are also possibilities to join the above states with DFS laws this year.