Virginia DFS games are now officially legal. The U.S. state has become the first to pass legal legislation to this effect.
What impact could one law in a single US state have on an entire global industry? Potentially quite a big one, it turns out.
DFS and US Legal History
The daily fantasy sports industry currently exists in something of a grey area. The 2006 Unlawful Internet Gambling Enforcement Act banned online gambling in the US. However, the act made a specific exemption for fantasy sports. There was no specific stipulation in the law that the fantasy sport in question had to be season-long. Thus daily fantasy sports were born.
Recently, though, the DFS industry has had a rough time of it. DFS is already considered illegal in 5 states (AZ, IA, LA, MT and WA). Officials in several others have questioned whether DFS should be considered a game of skill (i.e. legal under US law) or a game of chance (i.e. illegal). In this climate of uncertainty, FanDuel agreed just last week to cease paid operations in Texas. This state is home to a significant portion of DFS players. The future for the industry seemed potentially quite bleak.
On Monday, however, after months of legislative activity across the US, the DFS industry got an important boost as Governor Terry McAuliffe (D-VA) signed the Fantasy Contests Act into law, officially clarifying the legality of Virginia DFS and setting down the rules of how sites can operate.
One small step for Virginia, one (possible) giant leap for US
While this is clearly good news for Virginia DFS players, what does it mean for players elsewhere? Firstly, it’s a step towards securing the position of an industry that appeared to be teetering on the precipice. There’s now hope that other states will follow suit and adopt similar laws granting legal status. After all, they can cite Virginia as the precedent.
For fans abroad, this is important. While DFS is growing in the UK, the US remains the base for most sites. Without vital revenue from US customers, sites like DraftKings wouldn’t be able to operate. This would end some of the fun for players here in the UK too. The Virginia decision is a big victory for these sites, whose future seems a bit more secure than just a week ago.
Don’t miss the small print
There’s another side to the story, though. While the Fantasy Contests Act is a major victory for the big players in the DFS industry, for smaller sites there are concerns. To operate in the Commonwealth of Virginia, a DFS site will be slapped with a $50,000 licensing fee. If other states decided to adopt similarly prohibitive fees – Florida, for example, is considering an eye-watering one-time registration fee of $500,000 followed by an annual renewal fee of an extra $100,000 – it could price smaller operators out of the market.
For players across the world, this could mean a potentially smaller pool of sites to choose from in the future, as smaller or more niche sites struggle to pay the necessary fees to operate. Unless the DFS industry develops to the point where sites can be sustained solely through non-US income, this could mean a heavily reduced choice of sites for UK DFS players in the future.