Daily fantasy sports scores a big win in New York

Steven Loeb · June 20, 2016 · Short URL: https://vator.tv/n/4620

New York lawmakers vote to legalize, and regulate, the space, which Gov. Cuomo now has to sign

The daily fantasy sports space has been having a rough time over the last nine months or so, following a betting scandal. Since then it has been battling for its life all over the country, as state after state has taken up legislation to regulate, or sometimes even ban, daily fantasy sports leagues. 

Over the weekend, companies in the space finally got some good news, as the New York State Senate and Assembly both passed a new law that will allow daily fantasy sports to operate legally in the state. The votes were not close either, with the State Senate passing it with a vote of 45-17, and the Assembly voting 91-2.

The bill, A10736/S8153, is meant to "provide for the registration, regulation, and taxation of interactive fantasy sports contests in New York State."

Part of the bill "authorizes the registration of interactive fantasy sports operators to conduct interactive fantasy sports contests in New York State," while also establishing "required safeguards and minimum standards in order to provide players with important consumer protections."

That includes limiting players to one active account, prohibiting anyone under the age of 18 from participating in any contest, ensuring that accurate representations concerning the chances of winning are depicted in all advertisements, allowing users to close their accounts at any time, and giving information for potential gambling addicts. 

Both FanDuel and DraftKings, the two biggest names in the daily fantasy sports space, applauded the passing of the bill.

New York fantasy sports fans rallied – with more than 100,000 emails and thousands of phone calls to legislators – and legislators heard them and responded,” Nigel Eccles,  CEO and Co-Founder of FanDuel, said in a statement

The bill represents a thoughtful legislative process, where bi-partisanship and willingness to compromise carried the day, and we are extremely hopeful Governor Cuomo will sign this bill. We decided long ago to build FanDuel in New York because it’s the sports capital of the world and a thriving home for tech startups – a natural fit for fantasy sports. Our success is due in no small part to the people, infrastructure, partnerships and opportunities here, which very few locations in the world can offer.”

"DraftKings is extremely pleased that the New York Assembly and Senate have voted to provide a sensible framework for regulating daily fantasy sports in the Empire State," said Jason Robins, Co-Founder and CEO of DraftKings.

"Because of their actions, as well as the unwavering commitment from our supporters, millions of New Yorkers may soon be able to continue playing the games they love. From the very beginning, we have been committed to working with New York officials to develop model daily fantasy sports regulations that ensure transparency and robust consumer protections in the biggest U.S. market. This is a significant victory not only for DraftKings, but for the people of New York and daily fantasy sports enthusiasts throughout the country."

Winning such a victory is obviously a big deal for daily fantasy sports, but winning it in New York has to be especially gratifying, considering that is where all the trouble started in the first place. 

New York Attorney General Eric Schneiderman launched an investigation into whether the companies committed fraud after a DraftKings employee named Ethan Haskell inadvertently admitted that he had bet on FanDuel using insider information on NFL lineups before they had been publicly posted. He won $350,000 on the site.

Schneiderman sent letters to both companies, asking both of them for internal data, as well as details, on how they prevent fraud. He also asked for details on any internal investigations that the companies have done into their employees.

Both companies responded by banning their employees from playing in daily fantasy leagues, along with creating advisory boards to help them sort through legal matters.

That was not enough, however, and in his press release announcing that he was seeking an injunction to stop the two website from operating in the state altogether, Schneiderman said that both FanDuel and DraftKings were “plainly illegal” and “nothing more than a rebranding of sports betting." 

A judge banned them in December, but that decision was suspended the same day. Both companies ceased operating in the state in March, pending legislation, which has now been passed. 

Other states have followed suit, and 15 of them currently some type of legislation to regulate, or ban, fantasy sports, including California, Florida, Michigan, New Jersey, Pennsylvania and South Carolina. Fantasy sports has also been challenged, most notably in New York, in 11 states, and there are also five states that have banned it completely: Arizona, Iowa, Louisiana, Montana and Washington. 

Most recently betting on fantasy sports was banned in Idaho, though the companies are still allowed to offer free leagues in the state. 

The bill still has to be signed by New York Governor Andrew Cuomo, and it is apparently still unclear if he will do so. No matter what happens, though, Schneiderman is vowing to keep going after the daily fantasy sports space for any crimes may have been committed. 

"As I have said from the start of my office’s investigation into daily fantasy sports, my job is to enforce the law. Today, the Legislature has amended the law to legalize daily fantasy sports contests, a law that will be my job to enforce and defend. We will nevertheless continue to pursue our claims that DraftKings and FanDuel previously engaged in false advertising and consumer fraud," Schneiderman said in a statement issued after the vote. 

New York's initial legislation against daily fantasy sports caused a ripple effect around the country, and it will be fascinating to see if this action has a similar effect. If it does, it could have a major impact on a proposed merger between FanDuel and DraftKings, which seemed to be mostly about joining forces to fight impending legislation. 

(Image source: cardplayer.com)

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Hubdub Ltd is a VC funded start-up based in Edinburgh and San Francisco that aims to be the world’s largest developer of premium social games for sports fans. Its main product, FanDuel, transforms traditional fantasy sports ($1bn, 30m people market) into an instant gratification daily game where users win cash prizes every day. It is played on FanDuel.com, via white label partners such as Philly.com, and in future on Facebook and mobile.

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