For a moment, the future of Daily Fantasy Sports (DFS) like DraftKings and FanDuel was looking quite bleak. The story starts in fall of 2015 when New York Attorney General Eric Schneiderman sent out cease-and-desist orders to the DFS giants on the grounds that they were illegal gambling operations.
After much debate, New York legislators passed a bill to legalize and regulate DFS. New York Governor Andrew Cuomo made it official by signing the bill in the early fall of 2016. This ruling put regulations on the DFS companies and 15% of their revenues were taxed. At the time of the bills signing, DraftKings CEO Jason Robins had this to say:
“We are thrilled Governor Cuomo has signed the fantasy sports bill and we thank him for his support of this important legislation. We are excited to have our DraftKings contests return to New York and bring the fun and excitement of DFS back to our fans. We would like to thank our hundreds of thousands of New York supporters for their passion and loyalty over the past several months. Your hard work and efforts have made an incredible difference.”
The DFS issue is part of a bigger, more widespread reaction to online gambling—specifically sports betting. The Professional and Amateur Sports Protection Act, or PASPA, outlawed sports betting in 46 states. The only states that can legally permit state licensed sports betting were Delaware, Montana, Oregon and Nevada. These states already had some type of sports betting in place before PASPA, so they were grandfathered in. There are also state laws to consider, as many states consider DFS a form of gambling.
Since Nevada is the only state with brick-and-mortar sportsbooks, most American bettors rely on offshore sportsbooks to place bets. DFS has changed that market completely, and New York sports betting is starting to look a little different . The New York case was the first instance where DFS was brought to the limelight. Daily Fantasy Sports contests have risen dramatically in popularity over the years, as evidenced by New York residents’ reaction to the case against DFS. Other states have made resistance efforts towards DFS and watched to see how the New York case was handled. DFS is a gray area for many states, though there is legislation pending that could emulate the New York ruling.
The interesting thing about DFS and its battle with state legislation and the professional sports leagues are the contradictions present. States have issues with gambling, yet end up regulating it and taxing it for profit. The leagues complain about sports betting, yet three of the major leagues have equity in either DraftKings or Fan Duel. Teams and arenas have sponsorship deals with DFS outfits.
New York is specifically interesting because it makes up a significant part of DFS’ business. The major professional sports leagues also have their headquarters stationed in New York. There’s a conflict of interest that contradicts any negative reactions to the industry. If things remain this way, DFS contests will continue to gain traction throughout the various states. More regulations will be placed, more sponsorship deals will come and more teams will partner with DFS brands.
Bettors enjoy DFS more because there isn’t a season-long commitment like with other fantasy leagues. Players can get new players each week and base their decisions off the season in real-time. The response in New York is enough to see that DFS contests aren’t going anywhere. Just like any “taboo” industry—such as alcohol in the Prohibition era—state and federal government will have to take the public opinion into account. If the people want to engage in online gambling and sports betting, prohibition may be the wrong move.