Daily fantasy sports entries fall for third week; New York, New Jersey DFS bills

daily-fantasy-sports-declineDaily fantasy sports operators saw entry fees fall for the third consecutive week as two more US states announced efforts to impose regulations on the sector.

According to data compiled by SuperLobby.com, industry-wide entry fees for DFS operators’ guaranteed tournaments during the NFL’s Week 8 fell roughly 5% from Week 7.

Both DraftKings and FanDuel took in more money than they paid out in Week 8 but continued the slide from their Week 5 peak. Total number of entries in the sites’ Week 8 marquee NFL contests fell by 30k at DraftKings and by 20k at FanDuel.

Across all their NFL guaranteed prize pools, DraftKings took in just over $21.5m in entry fees, down from $22.7m in Week 7 and from $25m in Week 5. FanDuel took in $18.3m, down from $19.1m in Week 7 and from $20.6m in Week 5.

FanDuel has since announced another drop in the guarantee for its marquee NFL contest. The Week 9 Sunday Million will now feature a $3m guarantee, down from $4m in Week 8, although the winner will still receive $500k. For the moment, DraftKings’ Millionaire Maker will continue to live up to its name, offering $1m to the winner and $6m overall.

Third-tier operator Yahoo saw entry fees decline from $1.16m to $1m as the number of entries hit 147k, an all-time low, although the site reportedly experienced some technical hiccups prior to Sunday’s 1pm kickoff. Yahoo’s marquee NFL Sunday Baller contest posted a $120k overlay and the site has also reduced its Week 9 guarantee.

Meanwhile, two more states have put DFS in their regulatory crosshairs. In New York, Assemblyman Felix Ortiz filed AO8554, which would bring DFS under the oversight of the New York state gaming commission. AO8554, which has been referred to the Committee on Racing and Wagering, would add the phrase “fantasy sports gaming” to the list of the state’s legal gambling activities.

In a memo accompanying his bill, Ortiz cites the recent DraftKings’ data leak controversy as raising questions regarding “the transparency, fairness and security of the fantasy sports companies’ data about their rosters.” Ortiz says it is therefore “appropriate to put added consumer protections in place” by bringing DFS under the gaming commission’s purview.

AO8554 makes no mention of possible license fees or taxes on DFS operators’ revenue, and Ortiz’s memo lists the fiscal implications of his bill as “none.” The bill’s definitions also appear to limit DFS activity to “professional sport,” which seems to preclude college games.

Across the state line, New Jersey State Sen. Jim Whelan announced plans to introduce legislation that would bring DFS under the control of the state’s Division of Gaming Enforcement. Notably, the bill would also restrict DFS activity to persons physically present in the state, similar to the state’s regulated online gambling market.

The draft text of Whelan’s bill would require DFS operators to obtain a permit from the DGE, which would carry an unspecified “permit fee” that would be “sufficient to cover the division’s cost in issuing daily fantasy sports permits and overseeing the conduct of such games.”

Whelan’s bill would declare DFS to be “a game of skill and not be considered to be a game of chance.” As such, entry fees, management fees and other revenue generated by DFS operators “shall not be considered ‘gross revenue’” as defined by state gaming regulations.

As with the state’s licensed online gambling operators, DFS operators would have to physically base their servers within state boundaries. Whelan’s bill also envisions Atlantic City casinos offering DFS play, creating the option for DFS/casino partnerships similar to the state’s real-money-online gambling tandems, which could help DFS operators share some of the financial impact.

However, should Whelan’s bill pass as written, it’s quite likely that the already profit-starved DFS operators would choose to exit the New Jersey market rather than bear the added costs just to maintain access to a relatively small pool of players.

New Jersey’s step represents a middle ground between the approaches of Nevada, which insisted that all DFS operators obtain a gambling license and pay taxes or exit the state, and Illinois, which avoids branding DFS with gambling’s scarlet letter while seeking to impose light-touch ‘consumer protections.’ Pennsylania has also proposed casino-DFS partnerships, but would tax DFS revenue at a rate of 14%.