The daily fantasy sports bill in Indiana is getting closer to the finish line, after easily passing a committee vote on Monday and reaching the full House floor.
The bill — S 339 — has now been amended a couple of times since it was introduced. It started out with elements of the model bill put forth by the Fantasy Sports Trade Association, but it has also somewhat followed its own path in the legislature.
After the bill passed the House Public Policy Committee (12-1) last week — but before Monday’s House Ways and Means Committee vote (19-4) — the FSTA offered Legal Sports Report the following statement on the progress made in Indiana:
The FSTA is grateful that Chairman Dermody and the house Public Policy Committee passed this important legislation and the FSTA supports its passage on the full house floor. Both the Senate and House versions of the bill will achieve the industry’s goals of clarifying that fantasy sports are legal and creating important common sense consumer protection measures.
While some of those changes might be good for creating a better regulatory environment for fantasy sports, some provisions are probably not viewed as ideal.
The licensing fee
The bill is now on its third iteration of a licensing fee. As introduced, the bill would have charged just $5,000 to operators wanting to take customers.
In the House, the bill was amended to $75,000 as an initial fee, and $20,000 annually thereafter. On Monday, those figures changed again:
Rep DeLaney votes no on #DFS amendment because it would lower operating fees to 50K initial, 5K annual. But amendment passes.
— Mark Alesia (@markalesia) February 29, 2016
Indiana is a relatively small state in terms of DFS; LSR estimates the user base at about 75,000 people. While the fees are likely not an issue for DraftKings and FanDuel for access to the state, it could be a problem for smaller operators. And it’s also likely an issue for paid-entry seasonlong operators, who are unlikely to make that much money from players located in the state.
Indiana has continually tinkered with the number, and it’s now in line with Virginia — a bill that is now on the governor’s desk — at $50,000 up front. But as a straight figure to be paid up front, it might be a non-starter for a variety of operators.
Regulatory oversight
While a lot of bills being considered by legislatures amount to de facto self-regulation — with minor civil penalties and an annual third-party audit about the only oversight provided — the Indiana bill goes a lot further.
The bill creates the “paid fantasy sports division,” which is given wide-ranging powers to license and regulate daily fantasy sports — a provision that is lacking in a lot of DFS bills. The division may “take any reasonable or appropriate action” to regulate the industry; that includes conducting hearings and issuing subpoenas, in addition to other powers. In most states, the oversight component is fairly limited.
This should be seen as a net positive for the fantasy sports industry as far as effective regulation; this section of the bill gives it some teeth, with the ability for the state to enforce it in a meaningful way.
No amateur sporting events
The Indiana bill, unlike many other DFS bills, now excludes contests based on “college or high school sports.” This came at the suggestion of the NCAA, which is based in Indianapolis.
While DFS operators aren’t much interested in fantasy based on high school events, they are interested in college football and basketball. Giving those sports up is less than ideal for the industry, but it might not be worth picking a fight about: Those sports pale in comparison in terms of revenue to the major professional sports.
So far, the only other states with these types of provisions written into legislation are New York (a new bill last week) and Massachusetts (part of proposed regulations from the attorney general).
The industry would like to see states avoid this exclusion, but likely won’t try to scuttle progress on bills if it pops up.
The possible incentive for avoiding college contests? While the professional sports leagues won’t challenge a fantasy sports law under the Professional and Amateur Sports Protection Act, there’s the possibility that the NCAA might. Excluding college contests would mean the NCAA doesn’t have standing under PASPA, and avoids that potential variable.
What’s next for the Indiana DFS bill?
The bill likely will come up for a vote in front of the full floor of the House in the near future. Given the overwhelming margins by which it has been voted out of committees, its chances seem pretty good.
Although the bill has been passed by the Senate already, it is has now been amended on two occasions in the House — and could be again on the House floor. The Senate would still have to agree to those changes.
The bill could still use some of the suggestions here — on tightening language of what constitutes a “fantasy contest,” segregation of funds, problem gambling provisions, and a restructured registration fee.
That being said, it’s a more robust piece of legislation from a regulatory standpoint than a lot of its counterparts.
