If passed, the State Assembly’s bill would bring an end to the litigation between DraftKings, FanDuel, and Eric Schneiderman.
The New York State Assembly voted to approve daily fantasy sports in the state on Friday. The daily fantasy sports bill said that DFS is not gambling and would not violate the New York state constitution. The measure passed in the assembly by a vote of 91-22.
The New York State Senate is expected to consider the DFS bill late on Friday, though it is unclear when a vote will be registered. If the senate passes the bill and Gov. Andrew Cuomo signs it into law, daily fantasy sports on sites like FanDuel and DraftKings would once again be legal. DFS websites once again would be able to enter real money contests.
Eric Schneiderman’s Intervention
In November 2015, New York Attorney General Eric Schneiderman announced daily fantasy sports sites DraftKings and FanDuel were violating state gaming laws. Schneiderman sent cease-and-desist letters to the operators, saying they had 5 days to comply with the AG’s orders.
DraftKings and FanDuel each filed separate lawsuits against Schneiderman. They sought to have the New York Supreme Court to overturn Schneiderman’s dictate. Instead, they sided with the attorney general, though the two DFS sites did receive a temporary injunction, which allowed them to continue accepting play from New Yorkers.
Deal between Schneiderman and the DFS Sites
In December 2015, Eric Schneiderman upped the ante. He attached stipulations to his original lawsuit stating that the websites had to repay all the money they had won from New York fantasy sports owners, along with a $5000 fine for each of the owners. This would have been billions of dollars in fines and fees, and effectively bankrupted the companies.
In January 2016, DraftKings and FanDuel came to an agreement with Schneiderman. The two companies would stop accepting play from New York players. At the same time, Schneiderman agreed to have legality decided by the New York State Legislature. Instead of battling in court, DraftKings and FanDuel could win the right to host DFS gaming in New York, if the legislature passed a new daily fantasy sports bill before the court case happened — thought to be September 2016.
Gary Pretlow on the DFS Bill
Assemblyman J. Gary Pretlow, who heads the Assembly’s racing and wagering committee, said that the bill follows the wishes of the vast majority of New Yorker. Pretlow said, “We concluded this is not gambling. This is not a violation of the constitution. The legislative findings in this Legislature are that this is not gambling, and therefore not subject to the provisions of the constitution.”
Citing states like Colorado, Kansas, Tennessee, Indiana, Virginia, and Rhode Island, Assemblyman Pretlow said the New York bill was well within the mainstream of thought on DFS gaming. Pretlow added, “Three and a half million New Yorkers want to participate in these games.”
Deborah Glick on the Daily Fantasy Sports
Not everyone agreed. Assemblywoman Deborah Glick was against the bill, saying it was little different from sports betting. Assemblywoman Glick said, “It’s gambling pure and simple“.
Assemblyman Andy Goodell agreed with Glick. Goodell predicted that the DFS bill would not be the end of the debate in the state. He predicted that the legal status would be decided in the courts.
Tax Rate and Regulations in the Bill
If the law passes, all DFS revenues in the state would be subject to a 15% tax. An additional 0.5% tax would be assessed, though this could not exceed $50,000 a year.
Measures were added to guard against underage gambling, including regulations for age verification software. Geolocation software regulations were added, though the GPS technology is advanced enough that DraftKings and FanDuel already have geolocation for desktop computers and laptops, as well as mobile smartphones and tablet computers.
At this time last year, DraftKings and FanDuel were fighting against state regulations in any US state. It is a measure of how much the debate has evolved that the two DFS companies welcome such regulations now. When state AG’s like Eric Schneiderman want to ban the practice outright, it is much better to see laws passed which explicitly regulate the practice.
The key factor the two companies have fought for is to avoid the stigma of having their gaming described as “gambling”, like poker, slot machines, or sports betting. The New York bill currently does not define DFS as gambling, so passage of the State Assembly’s bill would be a major victory for FanDuel and DraftKings.
