Delaware Becomes Number 14 in Legalizing Daily Fantasy Sports

Delaware Governor John Carney signed House Bill 249, making Delaware the latest state to legalize daily fantasy sports. Delaware became the fourteenth state to formally legalize the activity and the fourth state this year. The bill classifies daily fantasy sports as games of skill, rather than gambling, and will take effect before the start of the upcoming football season.

The law attaches several regulations to the online fantasy sports. An operator, such as FanDuel and DraftKings, will have to apply for a license and pay a $50,000 annual fee. The sites will have to pay a 15.5 percent tax on their net revenues, unless another state imposes a higher tax then the operators will have to pay that amount in Delaware. Other regulations include advertising restrictions and a ban on minors visiting the sites. The law prohibits any contests based on college or amateur events, as well as horse racing. The legislature will have to reevaluate the bill in two years, as the law sunsets in 2019.

Passage of this legislation is a big win for the daily fantasy sports industry and not just for the obvious reasons. Matt Denn, Delaware’s Attorney General, issued an opinion last July stating it was his conclusion that daily fantasy sports were illegal under state law. After issuing this opinion, AG Denn issued cease-and-desist letter to the operators currently in Delaware. The new legislation makes last July’s opinion moot. This is approximately the fifth time a legislature legalized daily fantasy sports after the state’s attorney general issued a negative opinion. It occurred most prominently in New York.

Delaware actions come at an uncertain time for the daily fantasy sports world. Late last month, due to pressure from the Federal Trade Commission, DraftKings and FanDuel dropped their plans to merge. The sites are the two largest and control 90 percent of the daily fantasy market. The attempted merger was announced in November of 2016 and was driven primarily to reduce the legal costs the companies have accrued in their fight to legalize daily fantasy sports.

The United States Supreme Court is going to weigh in on sports betting. SCOTUS agreed recently to hear New Jersey’s appeal on the federal ban on sports betting, which Congress passed in 1992. Governor Christie signed a bill in 2014 allowing sports betting and was immediately met with lawsuits filed by the NCAA and the four major sports leagues. The Third Circuit upheld the federal ban on sports betting. The Supreme Court’s decision will have a major impact on the estimated $150 billion illegal sports gambling market.

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