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.
What is DFS?
Fantasy sports have existed for decades. They typically consist of friends or acquaintances running a season-long league.
Fantasy league members draft athletes whom they can choose to keep on their team for an entire season. Or, they can also dump any of these athletes throughout the season and replace them with others. The goal is to create a roster with athletes who consistently perform well.
Daily fantasy sports also involve choosing athletes who do well statistically. However, one key difference is the length of these contests.
DFS contests typically last between one day and a week. Therefore, you can enter many of these competitions within a short time frame.
You also need to stay under a specified salary cap when filling out lineups. For example, you might need to choose 10 players without going over $100,000.
You must pay entry fees for every contest you enter. Most of the entry goes toward a prize pool, while the site claims a small percentage as a house fee.
The two main types of DFS competitions include cash games and guaranteed tournaments.
Cash games include “double-up” and “50/50” contests. A double-up offers the chance to double your entry fee, while a 50/50 sees you win money if you finish within the top 50% of the field.
Guaranteed tournaments offer larger payouts relative to your entry fee. However, they only pay a small percentage of the field (e.g., 10%).
DFS sites cover several sports that can differ based on their primary customer base. US-facing operations typically feature MLB, NBA, NFL, NHL, NCAA basketball and NCAA football contests.
What DFS contests are allowed in New York?
NY allows multiple types of daily fantasy sports contests. The market features:
- Guaranteed tournaments
- Head-to-head games
As covered before, 50/50s and double-ups see you win money by beating at least half the field. Head-to-head matches see you play a single opponent for 100% of the prize pool (minus a 10% house fee).
Guaranteed tourneys pay larger prizes to the top 10-15% of the field. These events are popular because they can offer prize pools worth six or seven figures.
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.
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 sports betting 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.