Daily Fantasy News Updates for April 2017

Welcome back to another round of our daily fantasy sports news roundups. This month, we have four stories of particular interest:

  • Arkansas Formally Legalizes Daily Fantasy Sports
  • DFS Bill Moves Forward in Texas
  • DraftKings Launches Live Beta Website in Germany
  • Is the DraftKings / FanDuel merger in trouble?

Here at home, we’ve had more progress of legalization efforts at the state level in both Arkansas and Texas. An increasing number of states are getting on board and it’s promising to see legislators turn increasingly to the legalize and regulate approach rather than the prohibition approach.

Meanwhile, our friends in Germany are now getting their first taste of DraftKings DFS contests now that the company has a skill gaming license from Malta. And lastly, we will be venturing into the realm of speculation after an article published on Calvin Ayre raised interesting questions regarding the future of the much-publicized merger between leading DFS sites DraftKings and FanDuel.

Arkansas Formally Legalizes Daily Fantasy Sports

Yesterday, Arkansas joined the growing list of states that have formally legalized daily fantasy sports contests. Arkansas Governor Asa Hutchinson signed HB 2250 into law to officially make daily fantasy sports contests legal in the state. The bill also calls for an 8% tax on gross revenues earned by any person or organization that operates real money fantasy contests open to the public.

What’s interesting about this bill is it does not stipulate any regulations beyond defining what constitutes a “daily fantasy sports contest.” Bills passed in other states typically include a variety of rules and regulations regarding how operators manage their games. In other states, we have often seen regulations such as the requirement that player funds be kept separate from operating funds, the establishment of a minimum age, required self-exclusion programs and so on.

Arkansas apparently has no interest in regulating the industry within state borders, although it is possible regulations are promulgated at a later date. However, every mainstream DFS site is already active in other regulated states and already have certain rules and procedures in place to protect players and properly manage finances.

For anyone worried about the lack of regulations, remember that DFS sites in Arkansas must still adhere to existing business laws regarding deceptive trade practices, fraud and so on. It’s not as though DFS operators will have free reign to do whatever they want in Arkansas with no consequences whatsoever.

We should also keep in mind that the passage of this law does not result in any major changes on the ground. Daily fantasy sports sites have been active in Arkansas for quite some time. HB 2250 merely gives the sites a firm legal standing to continue operating as normal.

DFS Bill Moves Forward in Texas

While the good news in Arkansas is certainly welcome, developments in Texas will have a bigger impact on the fantasy landscape. Texas is not only a bigger market for DFS sites, but has also presented a greater legal challenge. Back in January of 2016, the Texas Attorney General published an opinion stating that daily fantasy contests meet the state’s definition of gambling and may indeed be illegal.

The opinion was nonbinding and had no immediate legal impact, but FanDuel eventually withdrew from the Texas market and hasn’t returned since. DraftKings decided to stick it out and fight, but obviously they would like to see a change in the law all the same.

That change may eventually come in the form of a bill that has gotten off to a positive start in the Texas legislature. HB 1457 introduced in February recently passed a committee vote and could end up for a full House vote. A companion bill in the Senate is also awaiting action in the State Affairs committee.

HB 1457 seeks to achieve two main objectives. First, it will clearly exempt daily fantasy sports contests from existing anti-gambling laws in Texas. Specifically, the bill says “a person who pays an entrance fee to compete in a fantasy sports contest is not placing a bet for purposes of the application of an offense under Chapter 47, Penal Code.”

Secondly, the bill introduced a number of consumer protection regulations. HB 1457 prohibits employees and their household relatives from participating in real money games, requires the protection of sensitive information that could be used to gain an advantage, establishes a minimum age of 18 and prohibits athletes and sporting officials from participating in contests involving sports in which those individuals are active.

If signed into law, the latest this bill could take effect would be 1 September, 2017.

DraftKings Launches Live Beta Website in Germany

A beta version of DraftKings is now live in Germany. In a press release published on the DraftKings website at the end of last month, DraftKings announced that they have begun hosting real money fantasy sports contests for all German customers.

The press release explained that DraftKings will be offering its full range of sports to all Germans. This includes soccer (all 7 leagues covered by DraftKings), NFL, MLB, NBA, NHL, golf, NASCAR, MMA and eSports. What’s more, all German players will be pooled with players from the rest of the world to create even bigger tournaments and prize pools for all fantasy contests.

It may not have seemed like that big a deal when DraftKings acquired a skill games license from the Malta Gaming Authority back in January. The small island country has a population of under 450,000 and doesn’t seem like the first point of attack for a European expansion among DFS operators.

The important of that license, however, is demonstrated by the launch of DraftKings in Germany. European Union treaties provide for the free movement of goods and services to all member countries except those that have special legislation for particular goods and services. In other words, a gaming license from Malta allows DraftKings to legally offer its product to other EU nations that do not already regulate or prohibit daily fantasy sports.

Is the DraftKings / FanDuel Merger in Trouble?

And last up for the day, we point to a recent guest column published on Calvin Ayre by Yousif Al-Dujaili of fantasy sports app Dribble. In the column, Al-Dujaili points to a number of what he calls “worrying signs” that the proposed FanDuel and DraftKings merger may not be going as smoothly as hoped due to possible possible antitrust concerns.

The issue a hand is that mergers between major companies must be approved by the FTC, which looks to prevent the formation of monopolies that could concentrate too much power in any industry in the hands of one, powerful company.

As Al-Dujaili notes, a merger between DraftKings and FanDuel would create a company that controls upwards of 95% of the daily fantasy sports market. Naturally, the FTC is going to be taking a very close look at this deal before proceeding. All of this was known previously, but Al-Dujaili points to several key concerns:

  • It has been four months since the announcement of the merger with no updates from either company.
  • The resulting company from the merger would control 95% of the DFS market.
  • The collapse of competing DFS provider Fantasy Aces may be taken into consideration to show that the market isn’t as open to new entrants as FanDuel and DraftKings would like to suggest.

Although all of this is mere speculation right now, the full column is worth a read. I don’t want to quote too much from the piece, but Al-Dujaili makes several interesting points as he addresses each concern.

On the other hand, Jeff Mans and Tommy G recently interviewed FanDuel CEO Nigel Eccles on Guru Elite and he sounded completely confident in the status of the merger. He said that they had planned to close the merger by the second half of 2017 and are on track to maintain that timeline. You can listen to the relevant portion of the interview on SoundCloud here.