By Jager Robinson, Katarina Delgado and Jason Lee
The New York State Senate has proposed an amendment to the 2017 budget to include a mandatory $500,000 licensing fee to all fantasy sports businesses operating within the state.
Groups like DraftKings and FanDuel have already voluntarily ceased paid-games in the state but have come out in support of a daily fantasy sports (DFS) bill.
“We are pleased to see lawmakers across the country taking steps to enact thoughtful and common-sense legislation that protects consumers’ rights to play the fantasy sports they love,” a DraftKings company spokesperson said.
Fantasy sports applies to season-long online games, where participants form their own sports team and win points using the statistics of real professional sport players. These sites exist for most team sports like baseball, basketball and football. Participants usually play for money.
The Small Business Fantasy Sports Trade Association (SBFSTA), who represent the smaller fantasy sports industry, said that they are concerned the licensing fee is too high, and makes it impossible for all but big business to operate in the state.
“I think the original bill that was put forth was definitely not something that would work for us,” David Gerczak, SBFSTA member and co-founder of Fantasy Football Player Championship (FFPC.com), said. “$500,000 is something that can only be afforded by FanDuel or DraftKings. We are looking at 70 or 75 different companies that would be shut out of New York.”
Although David disagrees with the current wording of the amendment, he is in favor of a law for DFS regulation.
“We have no problem with legislation. We support anything that can be done that protects players or make sure they are 21 or over,” he said.
This sort of bill is a strange move for the state to make, Mead Loop, an Associate Professor of Journalism at Ithaca College and DFS writer, believes.
“The argument that the state wants to stop gambling rings [is] hollow because for the right price, government officials are willing to continue to allow fantasy gaming,” Loop said. “But when a barrier to entry, such as a licensing fee, is introduced, it harms small businesses, and discourages start-ups and innovation.”
Alongside the opposition from small businesses, the amendment has been met with resistance from within the New York State Assembly. Kai Tesi Munroe, a panelist on the Assembly Racing and Wagering under Chairman J. Gary Pretlow, has voice Pretlow’s concern with the bill.
“Pretlow is in the works of introducing legislation that is going to be fair for smaller businesses,” Munroe said. “His legislation is coming sometime after the budget, either mid-April or last minute in May.”
Assemblyman Dean Murray representing Suffolk County also expects more comprehensive legislation to be voted on outside of the budget. Ed Flood, Murray’s chief of staff said the assemblymen proposed two bills that would define fantasy sports as not-gambling.
“The assemblyman agrees that there should be oversight,” Flood said. “He said that for some of the smaller ones [the $500,000 fee] would be cost prohibitive. There has been talk about looking at a scale the size of the company and the size of the business to come up with a fee that way.”
“I play fantasy sports, I’m 34, almost everyone my age know, in some way or another plays fantasy sports,” Flood said. “6 or 7 million people in the State [play fantasy sports] which is about a third of the state.”
Currently no litigation has come against small businesses in the state due to the ambiguity of whether or not fantasy sports legally can constitute as gambling.
“To a certain degree, small operators are using the lawsuit by DraftKings and FanDuel as cover to offer the contest because there was no definitive conclusion,” Justin Fielkow, a Lawyer with the Franklin Law Group in Illinois, said. “If [the attorney general] was to score a definitive victory between DraftKings and FanDuel then theoretically it would have implications on the smaller businesses.”
Even though the $500,000 licensing fee could destroy small businesses, Fielkow believes the idea of the bill is headed in the right direction.
“The idea behind the legislation being proposed is to exempt fantasy sports from that the state’s definition of prohibited gambling,” he said.
The New York State Senate and the Assembly will now have until June, the end of their session to craft the wording of the amendment and pass the bill.