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The meeting was called by the Assembly Racing and Wagering Committee in order to review the impacts of a DFS law passed in 2016.
At its face, it was a partial attempt to motivate regulators, who have yet to finalize industry guidelines. But the hearing also helped Assemblyman Gary Pretlow establish more groundwork in a potential push to legalize sports betting in the Empire State.
New York’s DFS law installed a set of temporary regulations pending further work. The state has since issued 15 permits to operators, but the guidelines are still unfinished.
Four members of the DFS industry testified at the hearing:
Schoenke spoke first. Like any good lobbyist, he started by praising the committee for its work on the legislation. Then he went about presenting his list of quibbles with the temporary regulations:
Representatives from all three sites spoke about the New York roots of their companies.
Borod offered this long and gushing sentence about FanDuel: “I think it’s fair to say that our incredible success — going from a tiny office in Midtown Manhattan with a handful of employees to one of the world’s leading sports entertainment companies — would not have occurred without the talent infrastructure and proximity to professional sports leagues and media networks that New York provides.”
He added one more ask to Schoenke’s list, too. Part of the proposed regulations block states from offering sports that they did not offer before Nov. 10, 2015. For FanDuel, that includes golf and soccer, two sports which DraftKings is able to offer in the state. Borod asked the committee to revise that portion of the regulations.
Finan and Murphy highlighted the thriving marketplace that New York provides and the tax revenue it has already generated. The state earned more than $3 million from DFS taxes in 2017.
After the initial statements, members of the committee presented a series of intriguing questions.
Assemblywoman Stacey Pheffer Amato led the questioning, which initially focused on consumer response. She noted that the tax income generated was not insignificant. The DFS panel agreed that it expects the number to increase going forward, too.
And then Pheffer Amato suddenly changed course: “So let’s talk about iPoker. Are you supportive of other types of online gaming?”
Schoenke indicated that the industry was more-or-less neutral regarding online poker. He dismissed the effect of one on the other, though he did note that there was some overlap for users.
“Do you feel that the legalization of iPoker would hurt your industry?” the Assemblywoman pressed further. Schoenke indicated that it would not.
Pheffer Amato moved on to another hot topic, too: “If the US Supreme Court rules that sports betting is legal, would your respective companies pursue including sports betting as part of your service?”
It would have been interesting to hear directly from DraftKings and FanDuel on this one, but they did not answer.
Instead, Schoenke did so. He called the two issues “apples and oranges” and said that the discussion of sports betting was “putting the cart before the horse.” He did mention that DFS operators are always keen to innovate their products.
The Senate will hold a similar hearing regarding sports betting on Jan. 24.
Here are a few other notes from the proceedings:
The three operators revealed the size of their respective New York operations during the course of the hearing.
FanDuel disclosed that it has “over 100 employees” based at its headquarters. That number may have been trimmed amid a recent round of layoffs. DraftKings claimed a staff of 30-35 in its New York office, and Murphy said that his Boom Fantasy team is a group of eight.
During the questioning, representatives for DraftKings and FanDuel were either unprepared or unwilling to divulge some key numbers.
DraftKings couldn’t clarify whether it had gained or lost New York employees in the last year. It also would not disclose how many New York residents use the platform, calling the information proprietary. Finan did say that at least “several hundred thousand” residents play on DraftKings.
Schoenke did not have the industry-wide number handy but cited that 60 million play across the country. That’s a number that the FSTA uses for the universe of “fantasy sports users,” but the total users affected by the NY law is a fraction of that. The law only deals with sites that take a portion of entry fees in order to run contests.
Neither DraftKings or FanDuel provided specific numbers regarding their advertising spend in New York, either.
Speaking of advertising, that was the question on the mind of Pretlow. He noted that marketing seemed to be down from the “big two” since New York legalized DFS. “Quite frankly, I haven’t seen any ads,” he said.
Pretlow poked around at the potential reasons behind that trend.
Again, it would have been nice to hear from DraftKings and FanDuel directly, but Schoenke took the lead. He said he didn’t know what the advertising budgets were, and Pretlow interrupted: “I can tell you they were spending millions prior to the law, and they’re spending nothing now.”
The ebb and flow of advertising is simply a function of the market, according to Schoenke.