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New York, of course, is one of the hotbeds for the legal status of daily fantasy sports, as DraftKings and FanDuel are currently engaged in a court battle with New York Attorney General Eric Schneiderman.
A host of other DFS legislation had been introduced in the past couple of months, but none of those bills had had so much as a committee hearing.
This one takes a more rigorous approach to regulating the industry. The summary of the bill indicates as much, as it would “amend the racing, pari-mutuel wagering and breeding law and the financial services law, in relation to interactive fantasy sports.”
Sen. Bonacic offered this statement to Legal Sports Report on the introduction of his bill:
“I have met with numerous individuals with disparate viewpoints regarding interactive fantasy sports, and have introduced this legislation to begin an open discussion on the regulation of fantasy sports operators. We need to ensure there are adequate consumer protections are in place to assuage the concerns of most, while also providing that those already in business can continue to operate. I look forward to working with my colleagues in both the Senate and the Assembly to ensure that this bill receives fair and timely consideration.”
What does the bill do? It diverges from the light regulation that is moving forward in many states, but takes a more stringent approach like in Florida and a handful of other states, where legislation has evolved through amendments.
Here is a look at the main provisions in the bill:
The bill sets up consumer protections, including restricting employees from playing paid-entry fantasy sports, requiring that data that could affect fantasy contests is secure and problem gambling measures, among others.
The bill also accounts for segregation of players’ funds, saying they must be “protected from corporate insolvency, financial risk or criminal or civil actions against the registrant.”
The most concerning aspect for the industry might be the registration fee and taxes. Even with the 36-month offset of taxes, it might be difficult for small operators to commit to New York with $500,000 needing to be paid, a figure DraftKings and FanDuel likely wouldn’t blink at.
Conventional wisdom says that the other bills active in the legislature are likely to fall by the wayside, and that Bonacic’s bill will be the vehicle to consider the legalization and regulation of the industry.
Why? Bonacic chairs the Racing, Gaming and Wagering committee in the Senate. If he had liked the approach of one of the other bills, he likely would have:
The fact that DFS had not been considered seriously via a bill had started to become conspicuous in New York, as legislative efforts in more than a dozen other states have picked up steam. And Bonacic’s committee even considered and passed a bill that would authorize online poker in the state before a vote had been taken on any DFS bill.
The fact that a bill has surfaced from Bonacic likely means this legislation will be the starting point for the DFS conversation in the legislature.
The fantasy sports industry would love to see a bill passed before the final outcome of a court case in New York, which will be argued in the state Supreme Court’s appellate division, likely this spring.
How much momentum this bill will have is a matter of speculation, but an educated guess would have Bonacic doing some behind-the-scenes work on the legislation. (For instance, there is an obvious hat tip to the horse racing industry in preventing fantasy contests based on horse races.)
No matter what, New York remains the most important battleground for the DFS industry, and one it can ill-afford to lose.
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