Lawmakers Not Interested In Banning DFS; Shape Of Regulation Remains Unclear
Legal Sports Report

New York Lawmakers Are On Board With Daily Fantasy Sports Regulation At Assembly Hearing

New York daily fantasy sports hearing
While New Yorkers awaited the outcome of a court case that will affect whether operators can continue to offer daily fantasy sports in the state in the short term, the New York Assembly held an informational hearing that offered insight into the future of DFS in the Empire State, and what form a legislative track might take.

The Assembly seems to be pointed toward a yet-to-determined regulatory bill.

“This is a much more complex issue than just saying ‘make it legal.’ There are a lot of nuances involved,” Committee on Racing and Wagering Chairman J. Gary Pretlow said near the end of the hearing.

Pretlow noted that the direction the courts take in regards to DFS will likely affect how legislation is written and moves forward in New York.

Top-level takeaways from the NY DFS hearing

The hearing took nearly five hours — the industry section of the hearing took more than three hours alone — with extensive questions coming from members of the Assembly. The hearing included the committee on Racing and Wagering as well as the Consumer Affairs and Protection committee, and the Legislative Commission on Administrative Regulation.

Here were the themes that came out of the hearing:

  • There appears to be little to no appetite to simply ban DFS; regulating the industry seems to be the consensus of how the Assembly will proceed.
  • There is a wide spectrum of knowledge of DFS from New York assemblymembers who asked questions at the hearing. Some had little knowledge about the industry other than it exists, while some had an intimate understanding of the industry and fantasy sports.
  • There were varying opinions voiced from assemblymembers about whether DFS constitutes gambling or a game of skill, and where it falls on the spectrum of chance and skill. Some members clearly said they believed it is a game of skill.
  • The horse racing industry was particularly concerned about unregulated fantasy horse racing, and some assemblymembers were aware of the issue.

No actual legislation was considered in the hearing; it was only meant for Assembly members to learn more about the industry.

The DFS industry panel

The meat of the panel came at the beginning, when five people representing the industry testified:

  • Peter Schoenke, Chairman, Fantasy Sports Trade Association
  • Randy Mastro, Partner, Gibson, Dunn & Crutcher LLP
  • Jonathan Schiller, Managing Partner and Counsel for DraftKings, Inc., Boies, Schiller & Flexner LLP
  • Cory Fox, Counsel, Policy and Government Affairs, FanDuel, Inc.
  • Jeremy Kudon, Partner, Orrick, Herrington & Sutcliffe LLP

All five offered testimony to the committee. Schoenke offered an overview of the industry and the skill vs. chance debate. Mastro and Schiller, who represent DraftKings in the ongoing NY Supreme Court case, largely talked about the current legality of DFS under New York state law. Fox offered some specifics about FanDuel. Kudon representing FanDuel, DraftKings, and the FSTA spoke briefly, after the other four had testified.

Much of the question and answer session consisted of assemblymembers asking basic questions, or stating their opinions about DFS. Here were some of the more important exchanges and opinions that were offered:

Pretlow and the panel

Pretlow led the proceedings, and dominated the initial Q&A portion of the hearing, asking a number of basic questions about the fantasy industry. After all that testimony, Pretlow opened with this:

“First, let me just state that we’re not here to litigate the legality of fantasy sports,” Pretlow said. “That is in the courts right now, and regardless as to what the outome of that case is, what we’re interested in …is regulation, licensure, consumer protection.”

Pretlow did note that he believed that DFS is gambling under the state’s penal code, an opinion that was not shared by all of his fellow assemblymembers.

At one point, Pretlow and Mastro had a pretty heated exchange over DFS vis a vis current law — and whether it is a game of skill or a game of chance — a subject that continued to come up throughout the hearing. That theme continued to surface, despite all parties acknowledging that that determination is out of their hands.

Regulation comes up

Kenneth Zebrowski, who heads the Commission on Administrative Regulations, appeared to be the assemblymember at the hearing who was most familiar with the fantasy sports industry, and the specific regulatory measures that New York might consider. He said he believes there is a lot of skill involved in DFS.

He asked the panel about their thoughts on a number of regulatory concerns he had, such as:

  • Should the minimum age to play DFS be 18 or 21?
  • What kind of ability do sites offer for players to self exclude themselves?
  • Do, and should, DFS sites offer contests based on college games?

In the end, he seemed to be advocating for a bill with actual regulations in it — something that has not yet been proposed in New York.

Daily fantasy sports’ NY champion: Dean Murray

Assemblymember Dean Murray is one of the lawmakers who is clearly most on the side of the DFS industry. He has sponsored two bills that would seek to formally legalize DFS in the state, stating that he believes DFS is “more of a game of skill than a game of chance.”

“I firmly believe that when you participate in daily fantasy sports contests, knowledge is your skill,” Murray offered during the Q&A session. “In my opinion, daily fantasy sports is nothing more than day trading for sports fans,” Murray said later.

As such, he said he wants to see regulation of the industry.

Horse racing and DFS

The conversation in New York took a turn that it has not taken elsewhere: A great deal of time was spent discussing the topic of daily fantasy horse racing.

Joe Faraldo, President of the Standardbred Owners Association of New York, testified after the industry panel and he was clearly disturbed by the presence of unregulated DFS for racing, outside the auspices of the highly regulated horse racing industry.

Even in the previous panel, Pretlow had mentioned the fantasy site Derby Wars, which has been named in a recent lawsuit.

Faraldo dwelled on what he saw as a threat from fantasy horse racing, and called for that portion of the industry to be regulated like all forms of wagering on horse racing in the state.

If the horse racing industry perceives this niche part of the DFS industry as a problem, expect it to come up in other jurisdictions that have horse racing tracks.

In good news for the DFS industry, however, the horse racing industry appears to want regulation of DFS, not a ban.

Other witnesses at the NY DFS hearing

  • Michael Nolan, Executive Vice President and Chief Operating Officer, Western Regional Off Track Betting and Batavia Downs Gaming, spoke to the panel about the idea of allowing OTB sites to conduct daily fantasy sports. He revealed an agreement with DraftDay to provide a white label solution for Western Regional OTB.
  • There was a panel of “problem gambling” advocates: Stephen Shafer of the Coalition Against Gambling; James Maney of the New York Council on Problem Gambling; and Les Bernal of Stop Predatory Gambling. They all questioned the DFS industry’s portrayal of itself as a non-gambling activity, and got some pushback from Murray.
  • Kevin Cochran, senior legal analyst for Gambling Compliance, briefly overviewed the approach that other states were taking in regards to DFS, and some of the issues any legislation might want to address.

What’s next for DFS and New York

Other than the idea that lawmakers and stakeholders generally agreed that regulation appears to be the best path forward in New York, there was little indication of what might happen next.

None of the bills introduced so far in New York contains any regulatory language. Nothing formal will happen regarding any DFS legislation until the next session begins in January.

It seems likely that we will see new legislation, beyond what has been introduced so far, that would offer a regulatory scheme that DFS operators would have to conform to.

The open question is how lawmakers will seek to treat DFS moving forward — with a light touch that simply includes consumer protections, or a more aggressive regulatory scheme that would view DFS more like a licensed gambling entity in the state.

Dustin Gouker
- Dustin Gouker has been a sports journalist for more than 15 years, working as a reporter, editor and designer -- including stops at The Washington Post and the D.C. Examiner.