Comments on A 10473 New York State Assembly “Relates to the registration and regulation of interactive fantasy sports contests”
Introduced by Mr. Pretlow May 27 2016
S 6793A was brought out in the Senate by Mr Bonacic on May 24. It is not a “same as” version but not very different. Comments in the body of this post concern the Assembly version. Do not write to a Senator about the Assembly version. See the appendix when writing a Senator. A letter can be done that can go to either chamber.
Coalition Against Gambling in New York (CAGNY), an all volunteer nonprofit organization, urges every member of the NY State legislature to vote against the bill if it comes to the floor in his or her chamber and to vote no on any larger omnibus bill into which A 10473 or S 6793A may have been inserted late in the session. Seven really good reasons:
We will return to each of these in more detail below
- Assumes that entering contests in fantasy sports is not gambling, attempting an end run around the NYS constitutional prohibition on gambling. It is gambling and internet gambling to boot. Only a few states allow internet gambling though all but two now allow certain forms of gambling such as casinos, card rooms or state lotteries.
- Considers certain video games to be “sports events” and players to be “athletes.” The bill would allow entry (that is betting) in a myriad of “Interactive Fantasy Sports Contests.” IFSC provide a vastly greater platform of events around the world than the stick and ball sports to which fantasy “sports” “contests” of the big operators in the USA have previously been confined. It would allow Daily Fantasy eSports (DFeS) without ever mentioning that term.
- Consumer protection has no watchdog, Everything is based on self-report by “registrants” [operators] to the Gaming Commission or by “authorized players” (bettors) to registrants.
- The drive to be “regulated” comes from companies that expect to profit from “regulation.” They want to create a market. Lobbying and outright corruption go hand in hand with such forces. Draft Kings was getting ready last September to launch its own DFeS.
- Revenue to the state from licensing fees and from a 15% tax on what operators hold after paying out winnings would not be even enough to cover the cost of “regulation.” This is explicit in the justification section of the bill memo (see below),
- Legalizing internet gambling in NYS would not increase tourism, would not promote “economic development,” would not provide “support for education” or “property tax relief.” The proposed legislation is a concession to special interest groups who want to resume hustling New Yorkers.
- Expansion of gambling, particularly to the internet, worsens social injustice.
- Gambling or not?
This dishonest bill ignores the opinion of the NYS AG, shared by other states’ AGs and other parties (football player Joe Namath, radio host Mike Francesca) that Daily Fantasy Sports as practiced by DraftKings and FanDuel is gambling. It does not even acknowledge a controversy in NYS or in any state. The bill avoids the issue by (a) limiting use of words that remind anyone of gambling and (b) implying that the AG’s complaint about DK and FD was related only to insider trading allegations. To illustrate (a), a text analysis:
- Term or word number times used in text of bill
“gaming” once § 1401 ¶ 3
“betting” or “bet” 0
“online” once § 1401 ¶ 8
“esports” or e-sports or eSports 0
(b) Watch the subtlety (deviousness) of the justification in the bill memo, which opens by saying that the AG’s office began in October to investigate “into whether employees of the two biggest daily fantasy sports companies, DraftKings and FanDuel, were able to gain an unfair financial advantage in daily fantasy football contests by exploiting access to non-public data” and continues “On November 10, the Attorney General’s office issued a notice to DraftKings and FanDuel demanding that they stop accepting wagers in New York.” It never gives the reason for the demand, namely that the AG considered the operations of DK and FD to be forms of gambling, which with certain exceptions is illegal in New York State. The justification pretends that the AG’s objection was to charges of insider trading. The AG’s main motivation, however, was not insider trading nor false advertising. It is given in the office’s memorandum below (italics added).
“The New York State Constitution has prohibited bookmaking and other forms of sports gambling since 1894. Under New York law, a wager constitutes gambling when it depends on either a (1) “future contingent event not under [the bettor’s] control or influence” or (2) “contest of chance.” So-called Daily Fantasy Sports (“DFS”) wagers fit squarely in both these definitions, though by meeting just one of the two definitions DFS would be considered gambling. DFS is nothing more than a rebranding of sports betting. It is plainly illegal. ”
- “Daily Fantasy Sports” becomes “Interactive Fantasy Sports Contests”
Since video game competitions are a booming activity around the world, the bill would allow betting (or in DFS terms, paying to enter a contest) on a vastly greater platform of events around the world than the stick and ball sports to which fantasy “sports” “contests” of the big operators in the USA have been confined. The bill is dishonest. It uses empty harmless-sounding terms (“interactive,” “contests”) to hide a huge intended expansion of opportunities to “play” on the internet. The most outrageous terminology calls video game players “athletes” so that competition in video games can be called a sports event.
http://www.legalsportsreport.com/4037/daily-fantasy-esports-market-overview/ Chris Grove on DFeS and the potential for growth September 18 2015. Quoting below
“Daily fantasy eSports (DFeS) is essentially identical to the mainstream DFS product. The competition structure, lobby, promotions, and other core elements are more or less interchangeable. The difference is that DFS players build rosters from athletes in stick-and-ball sports, while DFeS players build rosters from athletes in eSports like Dota 2 and League of Legends.”
http://www.legalsportsreport.com/4025/draftkings-fantasy-esports/ Dustin Gowker posted Sept 18 2015 on the announcement that DK was preparing to launch its own DFes site.
http://edition.cnn.com/2016/05/29/sport/esports-revolution-revenue-audience-growth/ posted May 29 by a CNN writer describes the potential for growth. League of Legends is a game that DK had its eyes on last September for its DFeS offering. A quote from this is below.
“The eSports industry has been experiencing double digit growth for several years and according to the research group Newzoo, it boasts a global community of 148 million enthusiasts. That number is projected to hit 215 million by 2019. Just one game — “League of Legends” — drew an audience of 36 million for its World Championship last year, that’s more viewers than the NBA Finals.”
- Consumer “ Protection”
The bill looks very consumer-protective, addressing many of the criticisms made of DK and FD, seemingly correcting those weaknesses. For example, it requires that the mean and median net winnings of all players be made public and that “highly experienced players” be labelled as such. It requires that payments be made to authorized players on time.
Loopholes abound. Here are some
If someone becomes highly experienced in the future but was not on the registration date, what mechanism ensures he will be labelled? Who checks for omissions? Who checks for aliases?
Persons under age eighteen are not supposed to be authorized. §1404 (b) (iii) says each registrant shall take all appropriate steps to confirm that an individual opening an account is not a minor.
There is no definition of “appropriate.” Is this an elaborate investigation like New Jersey’s “Know Your Customer?” Nothing is said.
Regulation, apparently on the honor system, is based on self-report, of registrants to “the commission” [ the Gaming Commission without the word Gaming] or of “authorized players” to registrants.
The proposed plan for voluntary self-exclusion has no supervision and no time frame. Someone could self-exclude from one site, then join another tomorrow. §1404 (d) reads enable authorized players to exclude themselves from contests and take reasonable steps to prevent such players from entering a contest from which they have excluded themselves;
What are “reasonable” steps? The Upstate New York Gaming Economic Development Act of 2013 spells out more detail on self-exclusion than “reasonable steps.”
The use of scripts is prohibited. (Section 1401 para 7) Without these computerized routines for composing teams, sharks and minnows would be on nearly equal footing. This would move things toward a truly fair game, closer to what seasonal fantasy sports were and are. “Highly experienced players” (AKA sharks) will not approve. The use of scripts is hard to prove though easy to suspect. Scripts will still be used sub rosa. The proposed legislation says nothing about penalties.
4. Who is behind the insertion of eSports into “regulation” of DFS? The drive to “regulate” comes from companies that expect to profit from “regulation.” They want to create a market much bigger than current DFS. Lobbying and outright corruption go hand in hand with such forces. Draft Kings was getting ready last September to launch its own Daily Fantasy eSPort (DFeS) with the video game League of Legends.
In Illinois last week a similar bill was tabled by its sponsor for the current session because of allegations of proposed vote-buying by a FanDuel lobbyist whose hapless explanation (“corporate social responsibility goals”) is here .
5. Revenue to New York State
Assuming “the commission” has the staff to add regulating IFSC to its other duties, who is going to pay for the effort? The Justification section of the bill Memo addresses the question.
“By registering and taxing interactive fantasy sports contests, this bill will also bring about a new and abundant source of revenue for New York State. Such funds will help [emphasis added] pay for the cost of regulation.”
How abundant will the funds be if they will not even cover the cost of regulation? It they don’t, what source will? This writer suspects that if this legislation passes not very much will be spent on enforcing regulations, and that some or most of the revenue will go into the General Fund. Realizing income to state coffers by stinting on regulation of gambling is hardly a new concept but, sad-to-say, appeals to budget-makers.
Admitting that legalizing internet gambling in New York State will not pay for “regulating” internet gambling in New York State shows that the drive to legalize internet gambling in New York State is not to help all New Yorkers. It is to help internet gambling special interests.
6. Tourism, “economic development” “support for education” “property tax relief” CAGNY has long said that “benefits” such as the above to localities, regions or states are illusory, really net losses when hidden costs are accounted for. This opinion, I admit, was was not shared by a number of lawmakers who voted for “second passage” of the “casino amendment” in 2013 while saying “I don’t personally support casino expansion.”
Legislators who previously voted to expand gambling in New York State because they believed the benefits to their constituents outweighed the costs can vote their consciences against this Interactive Fantasy Sports Contest legislation. It does not even pretend to offer any such economic benefits to the people of NY State. Nor does it enjoy popular support. A recent Siena poll showed 45% of respondents oppose legalization of Daily Fantasy Sports, 37% want it, 17% undecided.
Passage of this legislation is a handout from all New Yorkers to corporate special interests that can’t even pretend their plans will improve the quality of our lives.
6. Social injustice Government-sanctioned predatory gambling wreaks hardship and suffering not just on gamblers but on their families, friends, relative, employers, employees, clients and more. It contributes to social injustice. The 60+ posts on this site pile up the evidence.
Permission is hereby given by the author, Stephen Q. Shafer MD MPH, to reproduce this text in whole or part as long as the permalink above is cited. The photo image is from flickerCC title “Epic Showdowns” 95205711@NO2/23451208866.
Since publication on June 1 this post has been slightly revised.
From § 1401 ¶ 8 The term “Interactive fantasy sports contest” makes its debut in proposed legislation
18 8. “Interactive fantasy sports contest” or “contest” shall mean any
19 online fantasy or simulation sports game or contest offered by an opera-
20 tor or registrant in which an authorized player manages a fantasy or
21 simulation sports team composed of athletes from an amateur or profes-
22 sional sports organization and which meets the following conditions:
23 (a) the value of any prizes and awards offered to authorized players
24 shall be established and made known to such players in advance of the
25 contest, and such value shall not be determined by the number of author-
26 ized players or the amount of any entry fees paid by such players;
27 (b) no winning outcome shall be based on the score, point spread, or
28 performance of a single sports team, or any combination of such teams;
29 (c) no winning outcome shall be based solely on any single performance
30 of an individual athlete in a single sport or athletic event; and
31 (d) no game or contest shall be based on a prohibited sports event.
Comparing the Senate Version to the Assembly version: The Senate version is not as sanitized as the Assembly version. The word “gambling” is allowed, as is “gaming.” “Internet” appears The Senate version recaps and swallows whole tortuous arguments by counsel for FD and DK that skill is material, making the process not gambling. No mention that the Attorney General has ever said a word about DFS. The Assembly version avoids all discussion of controversy as to whether DFS is gambling.
The Senate version offers another gambit by DK and FD, that since seasonal fantasy sports were carved out from the UIGEA of 2006, Daily Fantasy Sports ( a later development) have been too. This to me is like saying that cars with engines should be allowed into a soapbox derby as long as they have four wheels.
The Senate version is even more vague than the Assembly’s on what sorts of “interactive fantasy sports contests: would be allowed. Neither version mentions eSports (video gaming).
The Assembly version prohibits high school sports; the Senate’s does not.
Senate: 15% tax on gross revenue from New York players Assembly 15% on gross revenue, residence not mentioned.
Senate version even looser than Assembly on what “compulsive participants” might do to remove themselves. Assembly calls them “compulsive players.”
Senate version more specific about how to keep minors out.
Both versions are vapid and vague about how to prevent use of scripts. Neither prescribes punishment.
Both versions share a unilateral assumption that Daily Fantasy Sports is not gambling, though they get there by different paths. The Senate version parrots Mssrs Mastro and Boies, counsel for two of the big companies. The Assembly version is a thick whitewash. They are asking the legislature to make an end run around the prohibition against gambling in the state constitution. Both versions provide paper-kitten protection against being hustled and fleeced. Neither version offers any benefit, credible or not, to the vast majority of New Yorkers. Casino expansion and Lottery expansion have been sold to New Yorker by mirages. Promoters of “Interactive Fantasy Sports Contests” (hitherto called internet sports betting) don’t offer mirages to the general population. Could it be that campaign contributions are a better deal ? This legislation is for special interests.
Archives about the AG’s case against FanDuel and DraftKings
http://www.nytimes.com/2015/11/11/sports/football/draftkings-fanduel-new-york-attorney-general-tells-fantasy-sites-to-stop-taking-bets-in-new-york.html?_r=1 NY Times November 11, the day after AG announced the cease and desist letter
http://www.nydailynews.com/sports/football/fanduel-draftkings-assure-users-remain-open-article-1.2431300 NY Daily News from November 11
http://www.nydailynews.com/opinion/editorial-fantasy-meet-reality-article-1.2431796 NYDN editorial says DFS is gambling.
http://www.nydailynews.com/sports/fantasy-sports-predatory-gambling-dangerous-article-1.2431896 sidebar by Stephen Shafer in Daily News article linked to above
http://www.ag.ny.gov/pdfs/DK_MOL.pdf complaint against Draft Kings submitted Nov 17, 2015
http://www.nydailynews.com/new-york/ag-schneiderman-bad-gamble-bluff-law-article-1.2441071 op- ed by AG Schneiderman November 19
http://www.nydailynews.com/opinion/fantasyland-n-y-bets-albany-casino-article-1.2652600 Daily News holds its great position May 31 2016