Playing daily fantasy sports in New York
Daily fantasy sports (DFS) is legal in New York. On August 3, 2016, Governor Andrew Cuomo signed a bill into law allowing DFS sites to serve New Yorkers. This came after a year-long legal battle between the states and the DFS industry’s largest operators.
The battle started with New York Attorney General Eric Schneiderman issuing a cease-and-desist order to DFS operators DraftKings and FanDuel in November 2015. He claimed DFS was illegal gambling under state law. Schneiderman even called the DFS industry a multi-billion-dollar scheme evading the law and fleecing sports fans.
DraftKings and FanDuel sued, claiming DFS was a game of skill. State senator Michael Ranzenhofer then introduced a bill to regulate DFS as well as clarify it as a game of skill as the case moved forward.
Schneiderman maintained DFS was gambling, and really just a rebranded version of sports betting. FanDuel promised to stop serving New York customers until a court settled the issue. However, DraftKings refused to comply.
In December 2015, a court granted a temporary injunction, preventing DraftKings and FanDuel from serving residents of New York. However, DraftKings and FanDuel were granted a stay in January 2016, allowing them to continue to operate in New York while the case was on appeal.
DraftKings and FanDuel partially settled the case in 2016, agreeing to stop offering paid games in New York and abide by the results of an upcoming appeals court hearing. The New York Legislature passed laws regulating and taxing DFS operations before the case went to the appeals court.
Now, all cease-and-desist orders are lifted and DFS sites operate in a legal and regulated market in New York.
Daily fantasy sports regulation in New York
There are a number of regulations, fees, and taxes associated with DFS operations in New York.
The New York law that legalizes, regulates, and taxes DFS:
- Gives regulatory control to the New York State Gaming Commission
- Forces licensed operators to pay 15 percent tax on gross revenues, and another 0.5 percent tax with a cap of $50,000
- Establishes a minimum player age of 18
- Bars DFS contests involving collegiate sports and horse races.
- Exempts DFS from the parts of the New York penal code dealing with gambling.
- Puts a number of consumer protections in place
New York’s Attorney General on daily fantasy sports
Schneiderman came out of the gate swinging when it came to DFS.
He called DFS illegal gambling, and claimed DFS operators were running a multi-billion-dollar scheme evading the law and fleecing sports fans. He followed that up with a claim DFS was just a re-branded version of sports betting.
Schneiderman issued a cease-and-desist order to the biggest DFS operators in the country, and defended it when they sued. However, as it became clear state lawmakers were going to pass legislation taxing and regulating DFS, Schneiderman began to soften.
He reached a settlement with DraftKings and FanDuel in advance of a legal appeal and new legislation passing.
Once the legislation passed, he took on a new position, issuing the following statement:
“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.”
In the end, Schneiderman also settled the false advertising and consumer fraud claims, forcing DraftKings and FanDuel to pay $6 million each in penalties.
New York’s biggest daily fantasy sports sites
According to the New York State Gaming Commission, the following lost of companies have permits to operate fantasy sports contests in New York State:
- Fantasy Draft
- Synkt Games, Inc. d/b/a letsRUMBL
- Fanamana, Inc.
- DataForce, LLC
- RealTime Fantasy Sports
- For Players By Players
- Vauntek, Inc.
- Sports Hub Technologies
Of course, FanDuel and DraftKings are the two most popular. In fact, FanDuel and DraftKings enjoy better than 90 percent DFS market share across the United States.
In November 2016, the two companies entered into a merger agreement. The deal should be complete sometime in the second half of 2017, pending an anti-trust review by the Federal Trade Commission.
Questions remain as to whether it will remain two DFS platforms or merge into one.
How popular is daily fantasy sports in New York?
New York is the fourth-most populous state in America, and professional sports is as popular in the state as anywhere in the country. It is a huge market for DFS. Considering the legislation passed in 2016, it is also a precedent-setting state for the industry.
Estimates suggest DFS sites are pulling in as much as $15 million in revenue from New York players. In fact, the state is responsible for almost 10 percent of all DFS contest entry fees in the United States.
It is estimated New York has more than 90,000 active DFS players. Those players are responsible for more than $150 million in annual entry fees, the second most of any state, trailing only California.