Industry Push for Legislation classifying DFS as a non-gambling activity

Fantasy Sports Industry has started a lobbying blitz on a national scale, as they face threats of extinction amongst legal ambiguity.

Legislative process around the country is being heavily influenced by Fantasy Sports; since the beginning of this year alone, 16 states have introduced bills to class DFS as a game of skill and not gambling. Several other states passaged similar bills through their committees. Despite these efforts, the confusion has caused payment processing companies to recede from their partnership with them.

Heavy activity

The lobbying endeavour, involving 78 lobbyists in 34 states, is being operated by Fantasy Sports Trade Association, FanDuel and DraftKings; with a budget of $10 million, they wish to exempt fantasy sports from gambling regulations, in eight states.

Around 25 such bills are currently under consideration; a well-known gambling analyst, believes rushing to pass these bills would create a lot of unregulated and untaxed sports betting with dire consequences for the country, as they do not seek to tax or regulate fantasy sports.

Consumer protection or taxation?

Joe Negron, a member of the Florida State Senate, stated that they do not aim to generate revenues with these bills but rather wish to legalise DFS and provide consumer protection for their players. As gambling is banned in most states, under federal law, these bills oblige DFS operators to pay a registration fee and provide consumer rights. Peter Schoenke, FSTA member, stated that they aim to obliterate the legal grey for DFS and make it lawful.

State attorneys on the other side

However, not everyone agrees, state attorney generals in seven states believe DFS violates their gambling laws. Marc Levine, California Assemblyman said, DFS should be treated like all other gambling ventures and was the only person to vote against the bill in California. Hawaii and Nevada have declared DFS illegal and both DraftKings and FanDuel have stopped operation in the states.

Rhode Island, on the other hand, decided that DFS, where users create virtual sports teams using real athletes, pay a fee to enter tournaments and win cash based on the actual performance of the athletes, complies with state law. The issue of legislation has not seen much rebuttal but that could change as it gains more momentum. Guy Linden, a representative from Iowa, where fantasy sports has been exempted from gambling laws commented that given the magnitude the DFS industry, legislation should be amended to include taxation.

Payment processing troubles?

Last month, Vanity, a major credit-card payment processor, announced their decision to stop working with DFS companies unless the legal confusion was cleared. Citigroup has already blocked credit-card processing for DraftKings and FanDuel in New York, where they are tied up in an aggressive lawsuit. Smaller firms could step in and take over payment processing, but this could result in a loss of customer confidence. Winning this legislation war could alleviate these strains between the DFS and Payment processor firms.

Eilers and Krejcik Gaming claims that the fantasy sports industry itself is only worth $290 million with four million players but extensive advertising has brought a lot of unwanted attention to their business.

The lobbying efforts so far, have only produces one clear supporter – Kansas, where DFS is explicitly legal. Several DFS supporters believe that participation in fantasy sports bolsters support for local teams. However, gambling addiction experts also warn that DFS gamers often display the same addictive behaviour recognised in traditional gambling.

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