What it is: The rise in popularity in recent years of daily fantasy sports contests that can generate lucrative cash winnings for successful players has prompted state policymakers across the country to draft new rules regulating the games or, in some cases, outlaw them as a form of sports betting. In New Jersey, a bill that would both regulate and tax the main websites offering daily fantasy contests has cleared two Senate committees but has not yet advanced further. That means, as a new National Football League season begins this evening, New Jersey remains among the states where sports fans are free to pick teams and go for broke.
How to play: For decades, sports fans have joined fantasy or rotisserie sports leagues where they assemble virtual teams made up of real professional players that then compete against other virtual teams drafted by their friends, coworkers, and other league members. The winners and losers of a fantasy league are typically determined through head-to-head matchups or at the end of the season by measuring the statistical performance of each team’s players using a series of categories, like home runs and batting average in baseball or passing yards and touchdowns in football. Some leagues charge entry fees and pay out prizes at the end of a season. In all, more than 57 million people participate in fantasy sports in the U.S. and Canada, according to the Fantasy Sports Trade Association.
But in recent years, websites like FanDuel and DraftKings have begun to offer sports fans the chance to play fantasy sports games that don’t play out over the course of a whole season but just one weekend or even a single day. A salary cap is used to prevent the daily contest teams from being stacked with only the best players at every position. The online format for daily contests has also allowed the pool of potential players who compete against one another to expand dramatically compared to the more traditional seasonal leagues, with professional football a particularly popular format. Players usually pay only a few dollars to join a daily contest, but prizes can rise into the millions, making the games lucrative for both the websites and the winning players.
Gambling or game of skill: As the daily fantasy games have taken off in popularity and become a multibillion dollar industry in recent years, questions have been raised about whether the contests that are played for cash should be considered a form of sports betting, which is banned in most states, including New Jersey, or a legal game of skill. Proponents of the daily fantasy games have long maintained that winning requires much more than just luck as the most sophisticated players spend hours going over lineups and matchups, assessing trends, and even tracking the likely weather conditions at stadiums across the country on game days. A federal internet gambling law passed in 2006 also included an exemption for fantasy contests that rely on the performances of real players participating in real games.
Still, several states, including neighboring Delaware, have informed websites like FanDuel and DraftKings that they consider daily fantasy contests where cash is at stake to be illegal sports gambling and have prohibited them from operating. The websites require players to set up an account to enter contests, asking for information like email, home addresses, and a player’s age that can be used to verify compliance with local laws. A bill signed into law last month by New York Gov. Andrew Cuomo kept daily fantasy contests legal in that state. The New York measure also requires the games to be closely regulated and the websites to pay both permitting fees and taxes on their revenue. A recent story published by ESPN.com indicated that daily-fantasy legislation was in the works as of last winter in nearly 40 states.
New Jersey legislation: Earlier this year, Sen. Jim Whelan (D-Atlantic) introduced a bill seeking to establish the legality of playing daily fantasy contests in New Jersey and to put in place regulations designed to protect the state’s consumers against fraud. Whelan, the former mayor of Atlantic City, said he wants New Jersey’s proposed regulations to become a model for the rest of the country as states continue to wrestle with the daily fantasy issue.
Under his bill, the games involving cash would be monitored by the state’s Division of Gaming Enforcement. The measure would also require the websites to pay permit fees and be taxed at a 9.25 percent rate, the same rate levied on Atlantic City’s casinos. Language was also included to protect against insider trading after concerns were raised last year about some employees of the websites potentially having access to proprietary information that could increase their odds of winning games offered by competing sites.
The legislation so far has cleared state Senate committees overseeing wagering and budget and tax issues, but it has yet to advance in the Assembly during a year in which lawmakers have been distracted by several more pressing issues, including the near bankruptcy of Atlantic City’s local government and the ongoing stalemate over renewing the state Transportation Trust Fund.