California Daily Fantasy Sports Bill
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Daily Fantasy Sports Would Be Subject To Licensing, Regulation Under New California Bill

California daily fantasy sports bill
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Assemblyman Adam Gray has introduced a bill that would require licensing and regulation for daily fantasy sports.

That bill is AB 1437.

The bill is technically not an introduction – rather, it’s a complete overhaul of an existing bill that was introduced in February 2015.

You can read full text and track the bill here.

This news comes on the same day that Gray introduced a bill to enable regulated sports betting in California. Today is the final day of the current legislative session.

The Fantasy Sports Trade Association was reserving judgment on the legislation as of Friday afternoon.

“We are still reviewing the bill, but we look forward to working with Chairman Gray in 2016 to educate him on fantasy sports and the benefits that our innovative technology provides to sports-loving residents and the California economy,” said Paul Charchian, president of the FSTA.

Former California Gambling Control Commission Richard Schuetz advised the DFS industry that it should “run toward” regulation earlier this year.

DFS bills go double-digits in 2015

California becomes the 12th state to consider legislation that would deal with daily fantasy sports this year.

So far, only one of these bills has become law, in Kansas; that state legalized daily fantasy sports earlier this year. Similar legislation in Iowa and Louisiana passed one house of the respective legislatures before progress slowed.

Bills in two states — Texas and Illinois — sought to regulate the DFS industry. Neither of those bills saw progress beyond introduction.

The approach of AB 1437

All DFS would fall under purview of regulators

As opposed to New Jersey, where regulators authorized land-based licensees to offer fantasy sports but didn’t speak to the position of DraftKings or similar sites, AB 1437 would require all DFS operators to come under the regulatory umbrella:

19760 (d) “Internet fantasy sports game” means a game of any duration conducted on the Internet in which a registered player does all of the following:

(1) Competes against other registered players or a target score as the owner or manager of an imaginary or simulated team of athletes in an imaginary or simulated game.

(2) Uses the statistics accumulated by the athletes in real-world sporting events to determine the scores of the imaginary or simulated game.

(3) Plays for a predetermined prize.

(4) Pays a charge to the licensed operator providing the game in order to participate.

[…]

19770. (a) A person or entity shall apply for and receive a license from the department prior to offering an Internet fantasy sports game for play in California.

Defining what DFS is

One of the more critical aspects of the bill defines what games licensed DFS operators can offer:

(b) A licensed operator shall ensure that an Internet fantasy sports game on its authorized Internet Web site complies with all of the following:

(1) An imaginary or simulated sports team in the game shall not be based on the current membership of an actual team that is a member of an amateur or professional sports organization.

(2) A prize or award offered to the winning registered player or players shall be established and made known to the participating registered players in advance of the contest.

(3) The value of a prize or award offered to the winning registered player or players shall not be determined by the number of participating registered players or the amount of any charges paid by those participating registered players to the licensed operator.

(4) The winning outcome of the game shall not be either of the following:

(A) Based on the score, point spread, or performance of any single real-world team or any combination of real-world teams.

(B) Based solely on the single performance of an individual athlete in a single real-world sporting event.

That language loosely follows the language of the section of the UIGEA that applies to fantasy sports.

Specific regulations

The California Department of Justice will handle licensing, with regulations to be promulgated post-bill.

Fees

Initial and ongoing license fees are TBA. So is the tax rate on gross income.

Sports before poker?

California has little legislative history with DFS or online sports, but a long one with online poker.

The state has purused regulated online poker since 2008, with no tangible result for its efforts. 2015 saw apparent progress on the California online poker issue, but not enough for a bill to move to a vote.

Interestingly, the introduction of a DFS bill opens up a second political front in California for Amaya.

The company is already battling to secure a place for PokerStars in any regulated online poker environment. Thanks to the recent acquisition of DFS operator Victiv (since rebranded as StarsDraft), Amaya now has skin in any legislative battle over daily fantasy as well.

Chris Grove
- Chris is the publisher of LegalSportsReport.com and OnlinePokerReport.com. Grove also serves as a consultant to various stakeholders in the regulated market for online gambling in the United States.
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