The Delaware General Assembly passed a daily fantasy sports bill by a 28-6 margin on Tuesday. The bill calls for a governor-appointed regulator to design regulations for fantasy sports gaming.
State Rep. Charles Potter, a Democrat from Wilmington, sponsored the bill in the General Assembly. For the bill to become law, the State Senate would have to pass the measure and Gov. John Carney would have to sign the bill into law.
Potter’s bill is a response to daily fantasy sports ban imposed by the Delaware Department of Justice last year.
Delaware’s Daily Fantasy Sports Regulations
Assemblyman Potter said fantasy sports activities occur in the state every day, but in an unregulated environment. Potter wants to include protections for DFS competitors, while collecting tax revenues for the state.
The assemblyman said, “It gives Delaware an opportunity to make sure everything is legal, because you have people playing sports, betting on something that’s not regulated, and we want to make sure its regulated, and it’s an opportunity for people to enjoy the sport and for the state to generate some revenue.”
While the bill legalizes all types of fantasy sports, it the kind of one-day fantasy sports offered on sites like FanDuel and DraftKings which receive the most attention. The two sites handle about 95% of all DFS gaming in the United States, but their activities became controversial in the past couple of years.
Game of Skill or Game of Chance?
DraftKings and FanDuel argue their contests are a “game of skill“, a distinction which would make the contests legal in most states. Critics argue that daily fantasy sports is a “game of chance” and should be banned like sports betting is. Delaware’s General Assembly charts a third course, which recognizes the game’s legitimacy, while adding regulations like consumer protections, age limits, and problem gaming policies. Potter’s bill calls DFS gaming a “game of skill”, a distinction he uses to justify his legalization attempt.
Since a DraftKings employee won 2nd place and $300,000 contest on FanDuel in October 2015, daily fantasy sports became a hot button issue. State attorney generals in Nevada, Illinois, Michigan, New York, and Texas banned DFS gaming. In the case of New York and Michigan, the legislature stepped in to legalize and regulate such gaming.
Matthew Denn’s 2016 Ban on Daily Fantasy Sports
In 2016, State Attorney General Matthew Denn notified DraftKings and FanDuel their activities were banned in Delaware. The Delaware Department of Justice sent a cease-and-desist letter to all major DFS operators, telling them “their respective online fantasy sports activities are not permitted under Delaware law.”
The General Assembly’s bill calls for all operators to apply for a gaming license. Licensed operators would pay an annual $50,000 fee, in addition to a minimum 15.6% fee on their net adjusted revenues. The Delaware DFS tax rate could go higher, based on “the equivalent of the highest rate set by another state”.
Delaware Lottery Recommends Independent DFS Regulator
Vernon Kirk, the Delaware Director of Lottery, told lawmakers in hearings that he does not believe his agency should regulate daily fantasy sports. Based on that recommendation, the General Assembly calls for Gov. Carney to appoint a “regulator he deems appropriate“.
Gov. Carney would have 120 days from signing the bill to appoint a regulator, while the Department of Revenue would have up to 2 years to make recommendations on the specific regulations which would be enforced.
Tuesday’s vote represents a significant step forward in Delaware for DraftKings and FanDuel. After Attorney General Denn’s letter last year, Charles Potter introduced a 2016 Delaware daily fantasy sports bill, but it never received a vote in the General Assembly.
Timothy Dukes Criticizes DFS Bill
Despite the 28-6 vote, the DFS bill had one vocal critic: Assemblyman Timothy Dukes of Laurel. Dukes said in a statement after the vote, “I have a real problem with a gambling bill being taken out of the umbrella of the Lottery. I don’t believe this is a game of skill — ultimately, it is gambling and is a game of chance.”
Fantasy sports owners would disagree with the representative. While any one outcome is left to chance, they would argue that certain competitors tend to win more often, due to better resource allocation and evaluation skills. Daily fantasy sports professionals named “grinders” win regularly enough to make a living at DFS.
Statistics introduced into dozens of legislative hearings over the past 2 years by DraftKings and FanDuel show that grinders win between 89% to 91% of all the winnings in DFS contests — a rate which could not be produced by luck.
Potter Predicts $515,000 in Tax Revenues
Charles Potter argues the activity already takes place in Delaware, so the state government would be wiser to regulate and tax one-day fantasy sports contests. Potter noted that 100,000 Delawareans already play daily fantasy sports. He estimates the annual tax revenues from such activity would be $515,000 per year.
Saying fantasy sports was a growing hobby in the United States, Potter described to the General Assembly how he calculated his figures. He said, “If you were to take 100,000 [people] and the average person pays $50 a month that would be $5 million, and at the end of the year that would be $60 million.
“So you can see there’s a great chance for revenue in the state, and it’s just going to grow because it’s not just one sport, it’s football, basketball, soccer, hockey, everything.”
At the moment, 12 other U.S. states have legalized daily fantasy sports and passed regulations.
