New York legislators got back to doing what New York state does best last month with regard to the burgeoning online fantasy sports business — regulate and tax the pants off it.
And for a change, it's a good thing for New Yorkers.
Gov. Andrew Cuomo will consider whether to approve legislation designed to tax and regulate the previously untaxed and unregulated industry — which sprung up quickly and attracted a billion dollars in business enticing people to gamble on fantasy sports teams. The industry’s two major players are FanDuel and DraftKings.
The problem with them is that the system appeared to be rigged in favor of certain players with inside knowledge of non-public information.
The companies were also found to be targeting minors and promoting compulsive play. That all prompted state Attorney General Eric Schneiderman to investigate and eventually reach an agreement with the two main companies to stop operating in New York in March.
But given the amount of potential sales tax revenue available from the games, and given that New York appears to be in on gambling on everything short of dog fights, it was inevitable the Legislature would find a way to allow the businesses to operate in the state.
And they did. But not without addressing many of the attorney general's concerns.
The bill passed by lawmakers (A10736/S8153) includes several safeguards to address the attorney general's concerns.
For starters, it gives the state Gaming Commission the power to regulate, investigate and audit the companies' records.
Companies would have to register with the state and submit annual reports, which the commission would use to create its own report that would be published on the state website.
As for the regulations themselves, the state would provide players with important protections, including limiting how much players could play and how many accounts they could set up, prohibiting participation by anyone under age 18, ensuring that the odds of winning are accurate and well advertised, allowing players to withdraw from contests and to close accounts permanently, identifying the highly experienced players, providing basic instruction, protecting players' privacy and funds, and providing information on compulsive gaming. In addition, the fantasy games can't be based on high school or college sports, or horse-racing.
As for the revenue part, the part that's really fueling the state's willingness to allow the businesses to operate here, New York would collect a 15 percent tax on the registrants' gross revenue, as well as a 0.5 percent tax limited to $50,000 a year — potentially bringing in $6 million a year to the state.
Of course, the money would allocated to the State Lottery Fund, to be used for our children's education. Nice touch.
It's obvious there's a demand for this kind of business, whether you call it gambling or games of skill or whatever.
Once the state expressed openness to all sorts of gambling — which Gov. Cuomo has shown in every way that it is — then the next logical step was to regulate and tax fantasy sports.
This bill does that. There's no reason, then, for the governor not to sign it.