A First-of-Its-Kind Fantasy Sports Law is Signed in Virginia

March 8, 2016
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by Jason M. Breslow Digital Editor

A FanDuel logo at the 2015 Legends Classic in New York City. (Porter Binks/Getty Images)

Virginia on Monday became the first state in the nation to adopt a law to regulate daily fantasy sports, a measure that effectively exempts the fast-growing — though controversial — industry from state gambling laws.

The regulations signed into law by Gov. Terry McAuliffe, a Democrat, require popular websites like DraftKings and FanDuel to pay a $50,000 fee to register with the state. No one under the age of 18 will be able to play daily fantasy sports, and neither will industry employees or their immediate relatives. Player funds will also need to be kept separate from company funds under the law, which gives the state’s Department of Agriculture and Consumer Services new powers to investigate violations.

The signing of the “Fantasy Contests Act” helps settle the debate in Virginia over whether daily fantasy sports are illegal games of chance, as opponents have argued, or as the industry counters, games of skill. According to the law, “all winning outcomes reflect the relative knowledge and skill” of participants.

“Today, Virginia became the first state in the nation this year to put in place a thoughtful and appropriate regulatory framework to protect the rights of fantasy players. We thank Governor McAuliffe for his leadership and advocacy and are hopeful that other states across the country will follow Virginia’s lead,” said Griffin Finan, director of public affairs for DraftKings, in a statement.

Cory Fox, an attorney for FanDuel, called the law “a thoughtful, deliberative approach to establishing a law that safeguards fantasy sports while installing consumer protections.”

The law comes as the daily fantasy sports industry finds itself on uneven legal ground across the United States. In 2006, Congress passed legislation aimed at banning online gambling, but a loophole in the law cleared a path for the proliferation of daily fantasy sports. But as sites like DraftKings and FanDuel have surged in popularity, taking in an estimated $3.1 billion in bets last year alone, the industry has come under scrutiny from lawmakers and regulators across the country.

Since November, attorneys general in New York, Hawaii, Illinois, Texas and Mississippi have all said daily fantasy sports violate their state gambling provisions.

Still, the industry has continued to enjoy rapid growth. In a recent interview with FRONTLINE, for example, FanDuel CFO Matt King said the site is signing up 20,000 to 30,000 new players every day.

Sites raised more than $1 billion in funding through the end of last year, according to an analysis by Legal Sports Report. Stakeholders include the owners of the Dallas Cowboys and New England Patriots, Major League Baseball and the National Hockey League. Prominent billionaires like Dallas Mavericks owner Mark Cuban have also invested in the industry.

With the industry estimated to generate $14.4 billion in entry fees by 2020, at least 20 states are now reviewing their laws around daily fantasy sports. Many are considering legislation similar to the measure just passed in Virginia, with the industry planning to spend as much as $10 million on the lobbying effort this year, according to a recent report by The Wall Street Journal.

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