The pressure on daily fantasy sports (DFS) continues to grow amid reports that a federal prosecutor has issued a subpoena to the industry’s main trade association.
On Friday, the Wall Street Journal reported that the Illinois-based Fantasy Sports Trade Association (FSTA) had received a subpoena issued by a prosecutor in the US Attorney’s office in Tampa, Florida. The news comes one week after reports that the same US Attorney’s office had convened a grand jury to investigate the DFS industry for possible violations of the Illegal Gambling Business Act.
The subpoena reportedly ordered the FSTA to hand over copies of its board meeting minutes. A source told the WSJ that the investigation was interested in potential fraud and/or antitrust violations involving the DFS industry’s larger sites, presumably DraftKings and FanDuel.
The news comes hot on the heels of reports that the Department of Justice and the FBI were conducting their own investigation into the legality of DFS. Meanwhile, the New York Attorney General’s office is also probing the companies’ internal policies and controls and Congress is pushing for hearings into the DFS industry.
PENNSYLVANIA SEEKS TO LIMIT DFS PLAY TO CASINO-RUN SITES
There seems to be no limit to the fronts on which DFS operators find themselves under fire. Less than 24 hours after Nevada gaming regulators declared DFS to be gambling and told DFS operators they must apply for gambling licenses if they wished to keep serving Nevada customers, a Pennsylvania legislator wants to restrict DFS operations to sites run by the state’s licensed casino operators.
Rep. George Dunbar, a Westmoreland County Republican, is a DFS proponent but wants to bring some legal clarity to the sector. Dunbar is dusting off legislation he proposed earlier this year that would codify state law to explicitly declare DFS to be a legal activity, provided it is conducted via sites controlled by the state’s 12 licensed casino operators.
Pennsylvania’s House Gaming Oversight Committee will discuss Dunbar’s bill at its meeting on Wednesday (21). It’s expected that the Committee will also vote on online gambling legislation proposed by Rep. John Payne, who chairs the Committee.
ILLINOIS TAKES DIM VIEW OF DFS
Meanwhile, gaming regulators in Illinois are seeking a legal opinion on the compatibility of DFS sites with state law. On Friday, Illinois Gaming Board spokesman Gene O’Shea told the Associated Press that the general opinion of the Board was that DFS sites were acting contrary to state law, which prohibits playing “a game of chance or skill for money or other thing of value.”
Back in April, state Rep. Michael Zalewski proposed legislation that would have explicitly regulated DFS activity, although the bill was only a stub and never gained any legislative traction.
COLORADO CASINOS WANT IN ON THE FUN
Further west, the Colorado Gaming Association says it’s still formulating a position on the DFS question, but exec director Lois Rice told the Denver Post that her group’s casino members “do think [DFS] should be regulated” because DFS operators “aren’t paying any taxes right now.” Rice believes her state’s casinos should be allowed to offer DFS games that would be taxed by the state.
While the pressure on DFS has been brewing for some time, Nevada’s declaration that DFS = gambling appears to be spurring more and more states to examine the sector more closely and to take a firm position one way or the other regarding legality, regulation and who gets to play in this pool.
Whether Congress acts or leaves the DFS question up to individual states, regulation and taxation are coming. Should more states adopt Nevada’s stance, DFS operators – who currently operate at a loss and thus don’t have any corporate profits to tax – will have to start paying tax on their revenue, not to mention new licensing and compliance costs. And most if not all of these costs will be passed on to DFS players. Enjoy these golden days while you can, kids.