This past Monday, a major development occurred in regulating Daily Fantasy Sports (DFS). When Virginia Gov. Terry McAuliffe signed a bill creating the “Fantasy Sports Act,” his state became the first in the US to enact a law regulating the industry
With this bill, there are several provisions that DFS operators must follow. First, operators must register with the Department of Agriculture and Consumer Services. Once they do this, they must pay a $50,000 fee to register in the state.
“When Virginia Gov. Terry McAuliffe signed a bill creating the “Fantasy Sports Act,” his state became the first in the US to enact a law regulating the industry .”
The DACS also has the right to investigate any possible violations of the act, and has full discretion to enforce it. DFS platforms are also mandated to prevent employees and their immediate relatives from playing in contests; to ensure security of data at the sites; and to segregate player funds from operational funds, among other consumer protections. Lastly, the minimum age to play DFS will also be set at 18, and an annual audit of all registered operators is required.
The biggest victory for DFS operators though, is the fact that this bill does not explicitly bar interstate play. There are concerns though that this bill will still not fully regulate DFS. Furthermore, there is concern that it could authorize other forms of sports betting outside of DFS.
“Playing fantasy sports is a skill-based hobby people should be allowed to enjoy.”
Although in more ways than not it is a victory for the continuation of the DFS industry, there is one other major concern- the $50,000 licensing fee. $50,000 is the equivalent of a bag of pennies for the DFS juggernauts like DraftKings, FanDuel, and even Yahoo. But this large fee may scare of smaller operators from joining a regulated market.
Furthermore, this fee could potentially create unfair competition between the larger and smaller operators. With this fee, it will be a struggle for the smaller operators that do not have the financial backing and resources of the juggernauts.
It will still be a process though for this bill to be fully implemented. The mechanics of actually licensing and regulating the industry will indeed take time. Until a formal process is put in place by the Department of Agriculture and Consumer Services for operators to register for a license, DFS operators could still theoretically operate. Once a form is physically created and the state begins to recieve applications, the following provision takes affect:
“Any operator applying for registration or renewal of a registration may operate during the application period unless the Department has reasonable cause to believe that such operator is or may be in violation of the provisions of this chapter and the Department requires such operator to suspend the operation of any fantasy contest until registration or renewal of registration is issued.”
Once this provision kicks in, operators not applying for a license would have to cease accepting Virginia users. The state by law will have to issue a license within 60 days of receipt of an application. If during this 60 day period a license is not issued, the state will have to provide a specific explanation as to why.
Despite the possible controversies and pitfalls of this bill, this is groundbreaking for DFS. Most importantly, this is one step further in proving that DFS is a game of skill- not gambling.
“This is an important day for the future of fantasy sports,” the bill’s sponsor, Senator Ryan McDougle said via a press release through FanDuel. “Virginia is leading the way in establishing strong consumer protections while sending a clear message that, with the proper oversight, playing fantasy sports is a skill-based hobby people should be allowed to enjoy.”