New York approves daily fantasy sports legislation but AG says fraud suits still on

new-york-daily-fantasy-sports-legislation-approvedDaily fantasy sports operators are breathing a little easier after New York state legislators approved bills to regulate the DFS industry.

The state Assembly approved their bill on Friday afternoon while the Senate had to go deep into the night before granting their assent. Gov. Andrew Cuomo now has 10 days in which to sign the bill into law.

Assuming Cuomo signs, operators who were active in the state before New York Attorney General Eric Schneiderman issued his cease & desist orders on Nov. 10, 2015 will be eligible for temporary permits to offer DFS contests, although there’s no timeline for how soon these permits might be issued.

The news comes as a major relief to DraftKings and FanDuel, who in March had halted real-money play in New York after striking a deal with Schneiderman. New York is considered to be the single biggest state market for DFS and neither profit-poor operator relished the idea of heading into the upcoming NFL season without its main money maker.

The possibility remains that some anti-DFS group could challenge the new law’s constitutionality, as the state is supposed to hold a referendum to authorize gambling games that rely on a significant element of chance, so this fight may not be over.

The legislation defines DFS as a game of skill, thereby exempting it from the state’s list of prohibited gambling activities. Licensed DFS operators will pay 15% tax on revenue generated from New York players, plus an additional annual 0.5% tax that can’t exceed $50k.

The bill also contains the now fairly standard ‘consumer protection’ measures, including no wagering on college events, warnings on the risk of “compulsive play” and slapping ‘highly experienced players” with a scarlet letter so newbies will know to stay clear in heads-up contests.

The bill also requires DFS operators to make “clear and conspicuous statements that are nor inaccurate or misleading” about the average player’s chance of winning anything.

The legislation’s rules against misleading players stem from the lawsuits Schneiderman filed against DraftKings and FanDuel last year, which slammed marketing pitches that focused on how easy it was for novices to pose in public with giant cardboard checks trumpeting their five-figure DFS winnings.

The operators’ deal with Schneiderman stayed the illegal gambling lawsuits he’d filed against the operators, with the proviso that New York had to officially authorize DFS by June 30. However, this deal didn’t prevent Schneiderman from pursuing separate suits alleging “false advertising and consumer fraud.”

Following the legislation’s passage, Schneiderman’s office issued a statement saying it “will nevertheless continue to pursue our claims” that the operators engaged in fraudulent marketing.