Smaller operators face the squeeze following Virginia’s DFS legislation

Smaller operators face the squeeze following Virginia’s DFS legislation

Tuesday, March 29, 2016 Totally Gaming

Smaller daily fantasy sports (DFS) operators could be squeezed out by new legislation that has been introduced by Virginia Governor Terry McAuliffe with the aim of legalising the sector in the US state.

The bill signed off by McAuliffe, the ‘Fantasy Contests Act’, requires businesses to stump up an annual registration fee of $50,000 (€45,000).

A group of fantasy sports website owners wrote to McAuliffe to warn that the consequences of the legislation could be devastating for their businesses.

“Given the cost constraints of our hobbyist business model, any requirement that we each pay a $50,000 licensing fee to the state of Virginia would lead us each to exit the Virginia marketplace – thus depriving hundreds of thousands of Virginia sports fans of access to play in their favourite traditional fantasy sports games,” the letter stated.

Virginia became the first US state to pass legislation that formally legalised DFS earlier this month.

The bill, which also keeps DFS from being classified as gambling in Virginia, requires fantasy sports operators to register with the state and pay the licensing fee ‘to cover oversight costs’.

Indiana recently passed similar legislation, requiring a one-off $50,000 fee before an annual fee of $5,000. New York is reportedly considering a $500,000 registration fee.

Rishi Nangia, co-founder of fantasy sports start-up Syde in Virginia, told NBC Washington that the bill, which will be activated on July 1, is likely to force his company out of business.

“I can’t tell you that FanDuel and DraftKings wanted this type of situation,” Darren Heitner, a Florida-based lawyer who represents small fantasy sports outfits, told the Associated Press news agency. “But they’re not displeased with them.”

Under the Act, DFS brands will be required to implement policies to verify that consumers taking part in contests are at least 18 years of age, while each site must each year undergo two independent audits of their operations to ensure they are operating in line with state regulations.

TotallyGaming.com says:

Many smaller operators in the sector complain that the major DFS players that could have an impact on the contentious issue of the registration fee have been conspicuous by their silence on the matter. But why should they speak up? Such legislative changes not only strengthen their own market position, but they also herald in much-needed structure into what has until now been a wildly unregulated market. The uncomfortable truth for many smaller operators is that they face a highly uncertain future, and with a culture of consolidation sweeping throughout the industry, many could be cherry-picked before July 1.

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