As NJ Seeks to Regulate Fantasy Sports Sites, a Sticking Point

Although some New Jersey legislators are bucking the national trend by trying to work out differences with daily fantasy sports leagues, one vital sticking point remains between the two sides.

State Sen. Jim Whelan (D-Atlantic) has drafted legislation to regulate and tax the red-hot daily fantasy sports sites in New Jersey. During a senate committee hearing Thursday, Whelan acknowledged that he has been negotiating with industry representatives to potentially welcome them here in New Jersey, despite many other states opting to fight the sites.

“The reality is that daily fantasy sports isn’t going anywhere,” Whelan said. “We can either do nothing or we can help attract these fantasy sports companies to New Jersey and protect consumers in the process.”

The bill, S-1927, takes strides to regulate and tax the sites by imposing a 9.25 percent tax rate. It provides oversight by the Department of Law and Public Safety, with a permitting process and rules meant to prohibit unfair practices and the sharing of insider information. The measure passed the Senate State Government, Wagering, Tourism and Historic Preservation Committee 5-0.

It does not take a position on whether the daily fantasy games are classified as games of skill or chance. And that is a major concern to A.J. Sabath, a representative for FanDuel, DraftKings and the Fantasy Sports Association trade group.

Sabath testified in opposition of the bill at Thursday’s hearing, despite acknowledging recent fruitful talks with Whelan and others on the Senate committee.

"The legislation being considered creates a significant level of uncertainty about the future of our industry in New Jersey," Sabath said.

Sabath said the industry is hesitant about investing in operations in New Jersey without fantasy betting being explicitly being defined as game of skill.

“Our industry lacks the necessary certainty to continue to operate in New Jersey without the continued threat of falling within New Jerseys gaming laws and regulations,” Sabath said.

About 30 states nationwide have introduced bills to regulate the daily fantasy sports leagues, but there's no broad consensus on how to categorize the games. Whelan said that some states regard them as gambling, others as games of skill, but New Jersey’s bill says neither.

“Frankly, I’m not smart enough to know if it’s gambling or skill,” Whelan said. “I’ve heard from customers who say, “Oh, I study up and pay tons of attention to this and do my research and I do pretty well. Other states say it’s gambling. There is some element of skill and luck involved, but the goal of the bill is not to settle that issue.”

“As daily fantasy sports continues to gain popularity, many states are struggling with how to efficiently regulate it,” Whelan said. “Our bill shows you have a regulatory model in place that protects consumers while at the same not overburdening fantasy sports companies.”