New York residents, you might be able to play daily fantasy sports again soon. A New York DFS bill was passed Sunday morning by the state legislature.
New York DFS Bill Looks like a Winner
If Governor Andrew Cuomo signs the bill – or takes no action on it for 10 days – sites like DraftKings and FanDuel would be able to immediately apply for temporary permits to operate games. The speed of that process is unclear. It may still be weeks before New York residents can actually make deposits on either site.
Both sites would then have to register with the state’s gaming commission for three-year licenses. That’s where the real emphasis of this regulation comes into play.
The state’s cut
The cost of the temporary permits and three-year licenses hasn’t been set, yet. Additionally, there is currently no process for renewing those licenses. The bill specifies the tax sites like DraftKings and FanDuel will pay on an annual basis, however.
The DFS tax is two-fold. The first component is a 15 percent tax on revenue just from New York players. The second part is a half-percent tax on all revenue, with an annual cap of $50,000.
The DFS tax will augment the state lottery, funding New York’s public schools. The amount of additional revenue will obviously depend on how many New Yorkers play.
DraftKings and FanDuel’s cut
The interest of DraftKings and FanDuel in New York is obvious. Almost 20 million people live in New York state. In addition to the overall population, the state is home to at least one team in each of the Big Four professional sports leagues. That means, in theory, millions of members of the target demographic for DFS sites are waiting to play. Outweighing the cost of the license and taxes would be the additional revenue.
The hypothetical new revenue would help both sites get closer to the goal of every business: making a profit. At this time, neither of these corporations can make that claim. The cost of advertising and fighting legal battles has eaten up revenue in huge chunks.
Stop being so vague
Despite a solid framework, there is some interesting language in the bill.
The legislation requires sites to identify “highly-experienced players,” but leaves the definition of that term up to the sites themselves. The bill also states that the sites have to “make clear and conspicuous statements about the chances of winning.” Putting an exact figure on the odds of winning DFS games is difficult, however. There are several factors which influence these games, many of them beyond DraftKings or FanDuel’s control.
In order to be classified as a legal fantasy sports game instead of illegal gambling, the games can’t be based on the performance of a single sports team. Stacking players from one team is a common practice in DFS, especially when considering baseball. It’s unlikely that the gaming commission would ban stacks, however.
At this point it seems a matter of when, not if, New York residents will be able to play DFS games again. How much New York’s schools will benefit or whether the extra revenue will make DraftKings and FanDuel profitable still remains to be seen.
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