Daily Fantasy Sports in Mississippi Is Legalized and Regulated by House Bill 967

Daily Fantasy Sports in Mississippi Is Legalized and Regulated by House Bill 967
Mississippi passed a daily fantasy sports law to regulate and tax the DFS industry. Experts believe it is worth $5 million in state revenues.

On Monday, Mississippi Governer Phil Bryant signed into law House Bill 967, which regulates daily fantasy sports in the state. House Bill 967 was sent to Gov. Bryant’s desk on March 2.

Mississippi is the first U.S. state to regulate daily fantasy sports in 2017. The bill gives the Mississippi Gaming Commission the authority to regulate daily fantasy sports contests held in brick-and-mortar casinos or on online websites.

This is the second time that Mississippi has legalized daily fantasy sports. Gov. Bryant signed a similar bill in May 2016, but only through the remainder of 2016. Senate Bill 2541 was planned as a test-run for a more permanent bill. SB 2541 expired in January 2017.

$5 Million in Tax Revenues

The cash-strapped State of Mississippi is seeking to generate $5 million a year from daily fantasy sports regulation.

More than one gaming analyst has suggested the $5 million figure is optimistic, while other suggested it is a small amount for a state with a $6 billion budget. Proponents of HB 967 argue it will save taxpayers millions of dollars, whatever the amount.

DFS industry analysts expect the major organizers of daily fantasy sports — such as the newly merged DraftKings/FanDuel, FantasyDraft, StarsDraft, and Yahoo Fantasy Sports Daily — to apply for licenses as regulated and taxed DFS operators.

$5000 DFS Licensing Fee

The licensing fee for such operations is small by industry standards: only $5,000 for a 3-year license. DFS operators will undergo a background check to receive a license, while they must submit to annual audits of their operating funds, player funds, and past contests.

The main expense for the companies in the Mississippi daily fantasy football industry will be an industry-wide 8% tax on revenues. Players under 18 will not be able to play games on the sites, while employees of daily fantasy sports sites will be banned from participation in contests.

Mississippi Daily Fantasy Sports Lobbying

Mississippi became a hotly-contested battleground in the ongoing daily fantasy sports legalization battles when Jim Hood, the state’s Attorney General, determined that fantasy sports was a game of chance. Daily fantasy sports operators argue that their contests are games of skill. They cite statistics that show professional DFS players called “grinders” winning about 90% of the money in contests.

The argument whether DFS is a “game of skill” or a “game of chance” is a key factor in legality in many states, though some attorney generals have stated that the debate is academic. For instance, many experts argue that poker is a game of skill, because professional card players use a combination of mathematical probability, body language, and bluff to win more consistently than other players. Despite those arguments, poker is still considered gambling in all US states, because of its notable skill elements.

Daily Fantasy Sports: A Game of Skill?

Daily fantasy sports is seen as a resource allocation game, because players are given an imaginary salary cap to sign individual players to their team’s starting lineup. Those players’ statistics are converted into fantasy points, which determine a winner. Serious owners in traditional yearly fantasy sports would argue there is a high degree of skill in their local leagues, because some owners win more consistently over the years than others.

Seasonal fantasy sports has different game dynamics, though, because the contests play out over the entire length of an NFL, NBA, or Major League Baseball season. With so many indidivual players and so many contests involved, skill becomes a greater factor than in one-day fantasy contests. Even then, fantasy football owners will admit that luck is a huge element of the game, because of injuries, shakeups in NFL depth charts, weather, and fantasy scheduling. Anyone who dominated in the regular season, only to lose in the first round of the fantasy playoffs, will lament how much luck is involved in fantasy football. Those who win tend to view their success as largely the result of skill.

In daily fantasy sports, players are signed only for a single day’s contests. That leaves a lot to chance, especially in the big Sunday’s guaranteed contests. Such tournaments often include hundreds of thousands of players. While there is a skill to picking the right players (and “fading” good players whom the bulk of owners might select), winning a big weekend contest is going to require a lot of good luck.

Texas Daily Fantasy Sports Bill

In Texas, State Senator Lois Kolkhorst, a Republican from Brehnam, introduced Senate Bill 1970, which would legalize daily fantasy sports in the Lone Star State. The bill has the support of DraftKings and other major DFS companies.

If passed, the bill would end months of infighting between Texas Attorney General Ken Paxton and industry giants like DraftKings and FanDuel. AG Paxton stated in 2016 that daily fantasy sports for real money is illegal in the State of Texas. The attorney general said all fantasy sports, including the kind played by 50 million Americans, is illegal. Sen. Kolkhorst’s bill would solve the impasse, while giving the state of Texas a revenue stream far larger than the Mississippi daily fantasy sports industry.

Ken Paxton has other concerns at the moment. In 2015, Mr. Paxton was indicted for securities fraud and failing to register properly, when he posed as a securities trader without registering with the Texas state securities board. His case is supposed to go to trial in May 2015. The SEC twice filed civil enforcement actions against Ken Paxton, but federal judge Amos L. Mazzant III dismissed those charges both times. The second dismissal was in March 2017. Ken Paxton’s lawyers have called for all charges to be dropped, but the trial still appears as if it will happen.

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