A New Jersey daily fantasy sports bill that a state senator plans to introduced is the strictest attempt to regulate the DFS industry.
“We have a draft of a bill that we are circulating to a variety of people, the Division of Gaming Enforcement, the Casino Control Commission, other legislators, as well as people in the fantasy sports industry, to take a look at what might be appropriate for New Jersey to do,” state Senator Jim Whelan told Legal Sports Report in an interview on Wednesday. “Other states obviously are looking at this; we’re not talking about doing anything to ban it or to make it more difficult for the customers.
“Clearly there are issues that have been raised and we need to have this conversation,” Whelan said.
What’s happening in New Jersey with DFS
Sen. Jim Whelan indicated he has plans to introduce a bill regulating DFS; it has not yet been filed in the legislature.
According to a post on Facebook, he said he has sent a letter of his intent to introduce legislation to Division of Gaming Enforcement Director Dave Rebuck and Casino Control Commission Chairman Matt Levinson.
From the letter:
“I don’t believe we should impede one’s enjoyment of fantasy sports. However, we have an obligation to ensure that fantasy sports competition is fair, impartial, and transparent to everyone.”
And from his announcement of the legislation:
“The Division has done a great job of regulating internet gaming companies and ensuring there are safeguards in place. We want to make sure that those same safeguards are in place with daily fantasy sports.”
The New Jersey DFS bill, at a glance
Text of the draft bill is available here.
Whelan’s draft bill is much more specific than some other bills that have been introduced, and sets forth a number of provisions. The bill sets up the skeleton of a regulatory scheme much like the one that is in place for online poker and gambling in the state; New Jersey is one of three states that regulates iGaming already (along with Nevada and Delaware).
“We have a model of internet gaming that has worked well from an integrity point of view in New Jersey and that piece of the business is slowly growing,” Whelan said. “So that’s the starting point for looking at if we were to regulate that, it’s one approach that we would certainly consider. I am open to better other ideas here, and open to of course trying to reach a consensus.”
The most onerous part of the bill appears to be that it would make DFS an intrastate activity, not an interstate one. In the bill’s definition of a “daily fantasy sports provider”:
…a business entity, other than a casino licensee, that has been issued a permit by the Division of Gaming Enforcement, established pursuant to section 55 of P.L. 1977, c. 110 (C.5:12-55), to offer persons who are physically present in this State the opportunity to participate in a daily fantasy sports game.
Whelan noted that he planned to work with Rebuck and other stakeholders on crafting the bill further.
You can read the full document here.
Other things the NJ DFS bill does
Here is a look at other measures the bill would put in place:
- A permit is required to operate a DFS site in the state.
- A “permit fee” will be charged to “each casino licensee or daily fantasy sports provider.” The amount of that fee is not set in stone; it merely says the fee should be “an amount sufficient to cover the division’s cost in issuing daily fantasy sports permits and overseeing the conduct of such games.”
- Allows casino licensees to partner with DFS operators.
- A DFS operator’s computers and servers must “be physically located within the boundaries” of Atlantic City.
- The bill says DFS “shall be a game of skill and shall not be considered to be a game of chance.”
- The Division of Gaming Enforcement is given authority to regulate permit holders.
- Sets a minimum age of 21 for DFS players.
New Jersey and online gambling
In many ways, New Jersey is ahead of the curve in being prepared to deal with the daily fantasy sports industry.
The state has successfully regulated online gambling and poker, from a logistics standpoint.
From a revenue standpoint, online gambling has done well, while online poker has struggled. Here are September’s numbers and a look at the rest of 2015’s online gaming handle.
Of course, DFS is much like online poker in how it operates. The industry’s revenue is based on generating liquidity, which New Jersey has struggled to do in a meaningful way in poker. New Jersey has not joined an interstate compact with Nevada and Delaware to pool liquidity on an interstate basis.
The DFS bill, as written, would be problematic for DFS operators and players. Limiting DFS in New Jersey to players located in state could mean operators would choose to leave the state entirely.
New Jersey and sports betting, DFS in the past
New Jersey has also already passed a bill legalizing and regulating sports betting in the state, although that law is held up by an ongoing court battle that New Jersey has been on the losing side of.
Interestingly, the NJDGE already put in place regulations to allow casinos to offer fantasy sports contests back in 2013. The difference now, however, appears to be this legislation would force operators to be licensed in the state, rather than simply allowing them to partner with casinos.
The political climate in New Jersey for a DFS bill
Based on the willingness to pass legislation based on online gambling and sports betting, there’s no question that New Jersey could get something done on DFS.
Whether New Jersey’s issues with online poker revenue will precipitate a different approach than the one outlined in the DFS bill remains to be seen. The state’s desire for regulatory oversight — which it largely already has in place — could trump its desire to help the industry.
New Jersey’s representatives in Congress have been particularly outspoken on the DFS issue, with Rep. Frank Pallone leading the charge for the federal government to take a look at the industry via Congressional hearings.
There is also the added wrinkle of Gov. Chris Christie, who famously shot down the idea of fantasy sports regulation during a recent Republican presidential debate.
Obviously Christie was going for a soundbite, so it’s possible he might change his tune when dealing with the issue in his own state. He has signed the sports betting and online gaming bills into law.