New Legislation to Impose Tax on DFS in New Jersey

A formal legislation has finally been introduced in New Jersey to regulate and tax daily fantasy sports.

State Senator, Jim Whelan, who mentioned plans to legalise fantasy sports in NJ last year, has revealed, on Monday that the state Department of Law and Public Safety will be in charge of distributing permits to casinos and other operators who wish to run DFS matches in NJ. They would also impose a tax of 9.25% on the total revenues of these DFS operators; this is the same rate at which Atlantic City casinos are charged.

A big effort for regulation

Whelan, who was the mayor of Atlantic City has been working tirelessly, meeting with players, regulators and officials to design the bill to regulate the billion dollar fantasy gaming industry. He mentioned in a statement that he is confident that the bill will safeguard consumer rights while protecting the sport itself; making sure customers continue enjoying fantasy matches. Whelan states that he believes NJ could set the example on how to “effectively and efficiently regulate daily fantasy sports” for rest of the country.

Whelan’s bill introduces other regulations on top on the taxes; under the new rules, employees of DFS sites and their immediate family members will not be allowed to participate in matches or share “insider information” with other players; anyone found in violation of these directives could face fines up to $200,000. A senate meeting is to be held on Thursday to try and finalise these options.

In daily fantasy sports, players create a virtual teams based on actual athletes and pay a fee to enter these teams into fantasy matches for a chance to win cash prizes; the outcome of the matches are determined by the real life performances of the athletes selected. The DFS industry is dominated by two major operators- DraftKings and FanDuel; their matches are usually one day or one week long.

Old Question: gambling or skill?

However, we must remember DFS in not the same as season-long fantasy sports leagues that people can form with friends; the NJ bill does not affect these types of games.

Fantasy sports have gained much popularity over recent years, it has also attracted much unwanted attention; there have debates to determine whether DFS should be considered gambling or a game of skill. In the scenario, DFS is considered a gambling activity, officials believe it should be regulated in the same manner as other gambling ventures and should be subject to taxation at the same rate. In October last year, Nevada did rule that DFS is a form of gambling and made it mandatory for all operators to acquire a license before they could operate in the state.

New Jersey is the latest state to join thirty others in introducing bills to regulate DFS; on the same day when Virginia also signed a law to establish guidelines for fantasy sports; California and New York have also proposed taxes on fantasy matches. Many more fantasy sports related jurisdictions are expected to be announced in USA in 2016.

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