A year ago we published a piece about it being the “end of daily fantasy sports as we know it.” Does everyone feel fine today?
In many ways, that headline was exactly correct: The terrain of the daily fantasy sports (DFS) world is wholly different than it was a year ago. After years of existing in relative quiet, DFS rocketed into the public eye, and found themselves under a whole lot of scrutiny. Last October, members of Congress had recently called for a formal investigation. Nevada’s gaming control board declared it as a form of gambling. The New York attorney general was expanding his investigation into the companies behind the sites, declaring them illegal, and ordering them to stop taking wagers in the state. And over the next year DFS started falling under the scrutinyof many state officials.
But towards the beginning of 2016, the tide started to shift, and in March Virginia became the first state to legalize DFS. The bill requires fantasy contest operators to make sure that individuals subject of the contests (like the athletes themselves) are restricted from entering, to register annually with the Department of Agriculture and Consumer Services, contact with a CPA to conduct an independent audit, and annually contract with a lab to verify compliance with procedures. Companies like DraftKings and FanDuel will also have to pay a licensing fee, and there are (of course) penalties for violating the law.
Perhaps most importantly, as Michael E. Strauss writes for AdLaw by Request, Virginia helped pave the way for how something like DFS could exist outside of a loophole in the Unlawful Internet Gambling Enforcement Act:
Virginia’s first-in-the-country Fantasy Contests Act establishes what appear to be workable parameters for DFS companies to continue operating in the state. With precedent in place, it seems to follow that the industry will advocate for similar legislation across the country. Here are some of the new law’s key components:
- Defining a legal “Fantasy Contest” – “[A]ny fantasy or simulated game or contest in which (i) the value of all prizes and awards offered to winning participants is established and made known to the participants in advance of the contest; (ii) all winning outcomes reflect the relative knowledge and skill of the participants and shall be determined predominantly by accumulated statistical results of the performance of individuals, including athletes in the case of sports events; and (iii) no winning outcome is based on the score, point spread, or any performance of an individual athlete or player in any single actual event.”
With more than 1.2 million DFS players in Virginia alone, it’s not surprising that DFS was able to find some support for its format, even if that format is—as many have argued—straight gambling. That user mobilization thing is big in the digital space these days. And with 33 million players generating an estimated $11 billion in revenue, it’s a powerful incentive. It’s the same reason New York, Maryland, Pennsylvania, and others have all seen bills be introduced that regulates the practice. Since Virginia’s bill, Massachusetts brought the total count of states that legalized DFS to nine.
New York was included in that count, issuing the first DFS permits in late August. And this week, the New York attorney general announced that DFS operators FanDuel and DraftKings had settled their remaining false advertising claims, to the tune of $6 million each.
Though only a handful of states have followed Virginia’s lead on this so far, DFS remains in play in about ¾ of the states. They’re more conservative; advertisement contracts have been cancelled, and marketing money is down. But they’re there. And they’re providing users more rights that incorporate regulatory changes.
Their world has changed, and yet, they’re still ready at the bat. Meet the new boss, same (with some minor, more regulatory compliant tweaks) as the old boss.
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