VW Blog

DFS Summer Legislative Updates

July 21, 2017   |   By Kevin Vela

It’s been a busy summer for state legislatures and a hopeful summer for DFS players. So far, 28 states have considered fantasy sports as part of their 2017 legislative agenda. At Vela Wood, we keep track of these developments and deliver you the essentials, so you can get the information you need, when you need it.

Check out our Fantasy Sports Contest Legislation Tracker for an interactive chart of each state’s legislation and regulation for daily fantasy sports contests.

Here are the most important recent developments:

Arkansas

Instant Replay

DFS companies are back in the game in Arkansas.

Game Recap

In April, Arkansas became the first state to legalize daily fantasy sports in 2017. The law is almost unprecedented in its simplicity. Other than affirming that daily fantasy sports are legal and imposing a small tax on operators (8%), the bill contains no real regulation. There are no fines, fees, or registration requirements, and unlike most other DFS legislation, there are no consumer protection provisions.

 

Vermont

Instant Replay

DFS companies are back in the game in Vermont.

Game Recap

In June, Vermont became the second state this summer to pass legislation exempting daily fantasy sports from gambling laws. The bill contains standard consumer protection language and also imposes restrictions on advertising, requiring that ads be truthful and aimed toward proper audiences. Operators must pay a yearly registration fee of $5,000, but the law does not impose taxes or any other fees. Overall, consumer-oriented provisions and relatively low fees will give big and small companies the chance to compete.

 

New Hampshire

Instant Replay

Legislation allowing for play in New Hampshire has been approved by the House and Senate and awaits Governor Sununu’s signature.

Game Recap

New Hampshire has taken the last step toward formally exempting DFS from gambling law. If Governor Sununu signs this bill, the state will officially recognize fantasy sports as a legal game of skill. The bill does not impose taxes or fees on operators, but does impose regulations that are designed to protect consumers. Most notably among those consumer protection provisions, beginners (players who have entered fewer than 51 contests) must have the opportunity to participate in contests that are open only to other beginners, and highly experienced players (players who have entered more than 1,000 contests) must have a clearly identifiable symbol attached to their username.

 

New Jersey

Instant Replay

Legislation allowing for play in New Jersey has been approved by the House and Senate, but registration fees remain to be determined.

Game Recap

New Jersey awaits Governor Christie’s signature on a bill that would officially exempt DFS from state gambling laws. The bill would impose a 10.5% tax on gross in-state revenue and require operators to obtain a permit and pay a registration fee in order to conduct business in the state. The registration fee—yet to be determined—will be established by the Division of Consumer Affairs. Additionally, operators would be required to maintain at least one of their computer servers in Atlantic City. Unlike the New Hampshire legislation, this bill focuses on fines, fees, and taxes, and imposes very little regulation on DFS activities themselves.

 

Delaware

Instant Replay

Legislation allowing for play in Delaware has been approved by the House and Senate, but hefty taxes and fees will impose huge barriers to entry for contest operators.

Game Recap

A year after ordering DraftKings and FanDuel out of the state, Delaware has pulled an impressive 180˚. If Governor Carney signs the bill, Delaware will officially exempt DFS from gambling laws, and DFS companies will once again be able to operate in the state. The substantial $50,000 registration fee and 15.5% tax on net in-state revenue, however, may mean that smaller companies continue to ride the bench. Distinguishing Delaware from New Hampshire and New Jersey, the Delaware bill would legalize an activity that was previously affirmatively prohibited; Governor Carney may be hesitant to sign on.

Pennsylvania

Instant Replay

DFS legislation is officially out of the starting blocks, but still has a long way to go.

Game Recap

Both the House and Senate in Pennsylvania have each passed separate bills that would exempt DFS operators from gambling laws, but the two sides have yet to agree on the same bill. These bills both address online gaming generally, with DFS accounting for a portion of the overall legislation. Because lawmakers hope to use DFS revenue to help fund the state budget, the bills propose steep taxes and fees for operators. The Senate proposed a 12% tax with a $50,000 maximum fee, and the House offered a 21% tax with a yet-to-be-determined flat fee.

 

Maine

Instant Replay

DFS legislation is officially out of the starting blocks, but still has several hurdles to clear.

Game Recap

On June 29th, the House passed a bill that would exempt DFS from gambling laws, and it now awaits judgment from the Senate. The bill proposes a registration and yearly renewal fee of 10% of net in-state revenue (not to exceed $5,000). The Senate has indicated interest in passing the bill, but this bill isn’t out of the penalty box just yet. Although the bill easily won the House vote, some representatives expressed that the proposed fees would not generate enough revenue for the state. If enough Senators share this hesitation, the bill could be K.O.’ed before it reaches the governor’s desk. Even if the bill passes in the Senate, Governor LePage, who has a historically contentious relationship with relaxing the state’s gambling laws, may choose to veto the bill entirely.

 

Ohio

Instant Replay

DFS legislation is officially out of the starting blocks, but still has several hurdles to clear.

Game Recap

The House passed a bill in May that would exempt DFS from state gambling laws and impose regulations on operators. Notably, the proposed bill would grant to the Ohio Casino Control Commission the authority to investigate, license, penalize, and regulate DFS contests. This means that the bill itself does not contain very specific language regarding fines, fees, and regulations, as many of these decisions will be left to the Commission. For example, the House has authorized the Commission to set the appropriate registration and licensing fee, as long as the fee does not exceed $10,000 for a one-year license. The Senate is expected to vote on this bill in the fall.

 

Illinois

Instant Replay

DFS legislation is officially out of the starting blocks, but still has several hurdles to clear.

Game Recap

In February, the Illinois House introduced a bill that would exempt DFS from gambling laws and allow for the regulation of operators. The bill proposes a sliding-scale tax ranging from 5% to 22.5% of in-state revenue, as well as a sliding-scale application fee ranging from $500 to $100,000.  This structure would offer rookies a boost over the often-insurmountable hurdle of steep registration fees, and allow for more participants on the playing field. All-stars shouldn’t start lacing up their cleats just yet though—Attorney General Madigan issued an opinion in 2015 declaring DFS activity illegal.

 

Michigan

Instant Replay

DFS companies can approach the starting line, but should wait to take their positions.

Game Recap

This summer the Michigan House introduced bills that would exempt fantasy sports from state gambling laws and impose a fee of 10% of in-state revenue (not to exceed $5,000) on operators. The House only meets once in July and once in August, so DFS companies will likely have to watch from the sidelines until September to see whether these bills make their way to the Senate.

 

North Carolina

Instant Replay

DFS companies can approach the starting line, but should wait to take their positions.

Game Recap

After suffering a small defeat when the House failed to pass a DFS bill in May, players can raise their hopes again. In April, the Senate began working on its own version of fantasy sports legislation. Although the bill is still in its earliest stages, the current provisions would impose a registration fee of 10% of the operator’s gross in-state revenue (not to exceed $10,000) and require renewal fees every 5 years. The bill contains standard consumer protection provisions, but has no tax requirement (yet).

 

Ones to Watch

Although DFS players in Texas felt defeated when the House’s proposed bill failed to make it out of session, they can remain hopeful that Governor Abbott will add it to the agenda of the special session this summer. Although Attorney General Ken Paxton has been critical of fantasy sports in the past, players can hope that if a bill makes its way through the House and Senate, the momentum will influence business-friendly Abbott. Additionally, Massachusetts’ current DFS law expires in 2018, and the state’s Special Commission on DFS and Online Gaming is expected to deliver a report this summer summarizing their suggestions for enacting a new law.

Kevin would like to thank his law clerk, Kristin Miller, for her help with this write-up.


Posted in Fantasy Sports
Kevin Vela
Kevin Vela is the managing partner at Vela Wood. He focuses his practice in the areas of venture financing, mergers & acquisitions, corporate law, capital raises, and real estate investment activities. You can see Kevin's attorney profile HERE.