A bill to legalize, license, and regulate daily fantasy sports in New Jersey was passed by a wide margin in the General Assembly on Tuesday. The measure passed in the Democrat-controlled Assembly by a 65-15 vote, and now passes to the State Senate for a vote.
Assembly Bill 3532 would regulate the daily fantasy sports industry in New Jersey, allowing operators like DraftKings and FanDuel to seek a license. If the new law were to pass, operators would need to pay a quarterly fee of 10.5% on all daily fantasy sports revenues they collected.
Regulation by Division of Consumer Affairs
In keeping with the official stance that DFS is not sports betting, oversight would not be under the aegis of the Division of Gaming Enforcement. Instead, the Division of Consumer Affairs, an office withing the Department of Law and Public Safety, would have oversight duties.
Steven C. Lee is the current director of the Division of Consumer Affairs.
The Division of Consumer Affairs would issue permits for all fantasy sports operators, while also reviewing racetrack licenses and casino licenses. The DCA's authority would include audits of monetary reserves (operating cash), along with the regulation of other financial guidelines.
Regular Fantasy Sports Unaffected
Small-scale fantasy games between family, friends, and coworkers would not be affected under AB 3532. That means local fantasy leagues or "yearly fantasy football" would not have to register or pay taxes on their gaming receipts. Daily fantasy football is an offshoot of the traditional local leagues, as DFS has one-day contests more akin to a sport bet.
Keeping in mind the exclusion for small-scale fantasy games, A3532 bans underage gaming under the age of 18 on DFS sites. The bill bans individuals with financial interests in the fantasy industry, including employees and investors, to play DFS in the state. It also bans fantasy gaming on high-school sports.
New Jersey's Sports Betting Appeal
General Assembly Bill 3532 comes at a time when New Jersey is at a crucial juncture in its campaign to legalize sports betting in the state. After 5 years and 5 lost court decisions, New Jersey has appealed its challenge to the 1992 PASPA sports betting law to the U.S. Supreme Court. The court has not yet decided to hear the appeal or not, though Active U.S. Solicitor General Jeffrey Wall has called on the Supreme Court to reject the appeal.
Some officials in New Jersey do not want to pass the DFS bill while the sports betting appeal remains unresolved. If the state was seen supporting a similar form of sports gaming, some believe it could undermine the PASPA appeal. For that reason, it is unlikely the State Senate would pass A3532 -- or Gov. Chris Christie would sign it into law -- until the Supreme Court announces its decision.
Hard Times for the DFS Industry
The move comes at a hard time for the daily fantasy sports industry. The Fantasy Sports Trade Association released a statement in April 2017 suggesting that two-thirds of the notable daily fantasy sports operators in the United States either have been bought out by a competitor or closed entirely in the past year.
The DFS industry is in the midst of a major lobbying effort to see individual US states legalize and regulate daily fantasy sports. The cost of those efforts, along with the constriction of revenue sources through bans in several major US states, has been too much for some of the less lucrative DFS operations.
FanDuel-DraftKings Merger Talks
Even FanDuel and DraftKings, who control 95% of the market between them, have faced their own struggles. The two companies have shouldered the burden of lobbying and legal battles for the industry, while seeing their revenues in Texas, Illinois, and New York State taken from them by bans (New York's legislature later regulated the industry).
Due to those efforts, FanDuel and DraftKings are in the midst of merger talks which would change the face of the industry. It is a far cry from two years ago, when the two DFS giants were in a massive marketing campaign to see who would be No. 1 in the DFS industry. At the time, both companies were signing partnership deals with US sports leagues and individual franchises, while obtaining hundreds of millions of dollars in investments from major New York City investment firms and media outfits.
The decision by NFL, NBA, MLB, and NHL league offices and franchise owners to sign sponsorship deals with DraftKings and FanDuel led to charges of hypocrisy by many gaming media and fan groups. The major sports leagues want to ban sports betting based on "public confidence" and "the integrity of the game", yet sign deals with sports gaming interests. The leagues argue that DFS contests are harder to rig, because they involve the outcome of 15 to 20 players (or more) competing in two or more games, instead of a single game's outcome.
About A 3532
The sponsors for the bill in the General Assembly are Vincent Mazzeo, Ralph Caputo, John J. Burzichelli, Paul Moriarty, and Thomas Giblin. An identifcal bill, S1927, will have a vote in the New Jersey Senate. The sponsors of S1927 are Jim Whelan and Brian P. Stack.
