Rep. Adam Gray’s Daily Fantasy Sports Bill Advances Out of Committee

After daily fantasy sports (DFS) companies went on an advertising spending spree for the start of the 2015 NFL season, the industry has become a hot topic with lawmakers. While some states have moved to ban such websites, California Assemblyman Adam Gray (D-Merced) has introduced legislation to legalize them. The bill, dubbed AB 1437, cleared a hurdle this week after being approved by the Governmental Organization Committee by a 17-1 vote.

Gray introduced the legislation in September, after DFS companies like FanDuel and DraftKings unleashed a torrent of advertisements on virtually every medium. Since daily fantasy companies are not regulated as gambling entities, Gray felt the need to explicitly legalize and license operators to protect consumers.

AB 1437 will put in place safeguards to ensure games are fair, prohibit underage usage, guard against identity theft and ensure that consumers are competing on a level playing field,” Gray said.

DFS Under Siege

Policymakers and law enforcement officials from several states have begun investigations into the thriving industry. Nevada, which allows licensed operators to offer online gaming, was the first to take action, declaring DFS contests to be gambling. Operators were forced out of the state, and can only return if they obtain a proper gambling license.

New York was second to act, when Atty. Gen. Eric Schneiderman announced that DFS sites were illegal under state law. DraftKings and FanDuel have received a temporary reprieve, however, after challenging the decision in court. Illinois and Washington followed suit, deeming the DFS industry to be illegal under their state laws well.

Analysts say that California players make up 15% of the US DFS market. Consulting firm Eilers Research estimates that $3.72 billion in contest fees will be paid this year, with revenues of $370 million going into the pockets of daily fantasy operators.

Not everyone is excited to see DFS become legalized in the Golden State. Fred Jones, head of the California Coalition Against Gambling Expansion, says that bettors already have plenty of gambling outlets to choose from.

DFS and Online Poker Together?

Indeed, and if California’s gambling interests can decide on the terms of online gambling legislation, residents might have even more choices.

While DFS is effectively in limbo in New York, lawmakers there have floated their own legislation to legalize the industry. This week, an online poker bill was also introduced as well, giving some the impression that the two pieces of legislation could be combined and hasten the legalization of both industries. Something similar could come to pass in California, but with the animosity high between the state’s gambling stakeholders, nothing is a sure bet.

Assemblyman Mark Levine (D-San Rafael) was the only member of the GO committee to vote against the daily fantasy bill. He believes that to be approved, California’s voters need to vote on the issue themselves.

Representatives from the DFS industry did not testify at the hearing, although DraftKings later submitted a statement of support: “We thank chairman Gray for taking the lead on this issue and look forward to working with the legislature in California, as we are in other states, while the bill advances through the … process.”