Chairman Adam Gray wants to pass DFS legislation before Attorney General Kamala Harris does like Eric Schneiderman.
Spokespeople appeared before a California legislative committee on Wednesday to represents the concerns of FanDuel and DraftKings. The committee had called hearings to consider a legal framework for how daily fantasy sports operates in California. FanDuel and DraftKings, the leading companies in the DFS industry, pushed for a regulatory framework instead of a ban of their industry.
The two companies have faced legal troubles in New York state and other jurisdictions around the country these past 3 months. Eric Schneiderman, the Attorney General of New York, banned DFS gaming for real money in his state, because he defined such activities as “gambling”. DraftKings and FanDuel have taken Schneiderman to the New York Supreme Court, but one ruling has went against them and most experts predict as second and final hearing scheduled for January 2016 is also likely to go against them.
10% of DFS Industry Revenues at Stake
If so, DraftKings and FanDuel will not longer be able to accept payments from residents of New York. That would eliminate about 15% of the companies’ US revenues. If the lost access to California, too, they would lose another 10% of their revenue stream and be in serious trouble. Because legislation in California is pivotal to the future of those companies, they have tried to anticipate any troubles which might happen.
The Wednesday hearings were held in the California State Assembly’s Committee on Governmental Organization. The hearings were called by Assemblyman Adam Gray, a Democrat who represents Merced County and parts of Stanislaus County in the San Joaquin Valley. Assemblyman Gray wants to pass regulations before California Attorney General Kamala Harris takes measure similar to AG Schneiderman. He believes new laws would circumvent the need for emergency action by the California AG.
Adam Gray Suggests Regulations
In the opening remarks at the hearing, Adam Gray said, “Recent events reported by the New York Times have highlighted the need to provide consumer protection to consumers who wager on daily fantasy sports websites, i.e. FanDuel, Draft Kings, and Yahoo.”
Chairman Gray said DFS gaming is a reality, so lawmakers should make certain it is regulated and taxed in a sensible fashion.
In the days before the hearings, Gray appealed to his fellow lawmakers’ pragmatism on his official website. Gray said, “Daily Fantasy Sports betting is happening in California, whether we like it or not. This is an unregulated industry, whose revenue is in the billions of dollars. The December 16 hearing will provide the Legislature the necessary information to move forward with efficient and well thought legislation that will protect consumers who use daily fantasy sports websites in California.”
Martha Coakley Spoke for DraftKings
One of those present was Martha Coakley, who once served as the Massachusetts Attorney General. Mrs. Coakley now works for DraftKings, whose offices are located in Boston.
At the hearing, Martha Coakley urged lawmakers on the Governmental Organizations Committee to take a more measured approach than Eric Schneiderman had. Coakley told those assembled, “We’re not saying ‘don’t do anything’. We’re just saying take it [action] in a reasonable, careful way.”
Peter Schoenke and Griffin Finan Testified
Peter Schoenke also spoke on behalf of regulations. Schoenke, who serves as the Chairman of the Fantasy Sports Trade Association and the President of Rotowire, claimed fantasy sports are skill-based, and thus should not be treated as a form of gambling to be banned.
Comparing fantasy sports to sports itself, Peter Schoenke said people can improve their results with practice. He also said daily fantasy sports allows people to use “judgment-making skills similar to a coach or general manager.”
Griffin Finan, an attorney for DraftKings, made a similar argument. Finan said, “These are games of skill, skill that rewards knowledge of sports.”
California Gaming Laws
Adam Gray’s instinct to push through legislation on daily fantasy sports is likely to be a good one. One can read the transcript of the Wednesday hearing and see that DraftKings, FanDuel, and its allies were pushing their interpretation of DFS gaming strongly.
California is a gambling mileau with many different voices, none stronger than the land-based Native American gaming authorities. A majority of the Indian tribes have tried hard to keep online poker out of California and they have been successful in keeping PokerStars from moving ahead with its plans to enter the iGaming market in California. If the Native American tribes want to bar DraftKings and FanDuel, that would be a difficult obstacle to overcome. Luckily (in this case), brick-and-mortar sports betting is illegal in California, so Pechanga and its allies might not see the threat from DFS gaming, since they cannot offer sports wagers legally.
