New Jersey Gov. Chris Christie signed a bill on August 24 that will regulate daily fantasy sports betting, a multimillion-dollar-a-year industry in the state that has, until recently, gone largely unregulated nationwide.
Christie signed the legislation without comment.
The Senate gave final legislative approval to the bill, A-3532, in June, shortly after the U.S. Supreme Court announced it would hear New Jersey’s appeal of lower federal court rulings that have barred the state from legalizing sports betting, an initiative that is supported by Christie and by both Democrats and Republicans in the Legislature as a means of raising revenue.
The bill was sponsored by Assemblymen Vincent Mazzeo, (D-Atlantic), Ralph Caputo, (D-Essex), and John Burzichelli, (D-Gloucester).
According to Legal Sports Report, a publication that focuses on the sports-betting industry, 10 other states already have enacted similar legislation: Arkansas, Colorado, Illinois, Kansas, Massachusetts, Mississippi, Missouri, New York, Tennessee and Virginia.
“The fantasy sports industry is a growing market year after year. The time is right for New Jersey to enter the fold with regulations aimed at providing strong consumer protections for our residents,” Mazzeo said in a statement after the Assembly approved the bill.
In daily fantasy sports, players “draft” real-world athletes using a “salary cap” and amass points based on each athlete’s statistical performance. Most competitions last only one day, although other versions can last a week or a full season. The predominant daily fantasy sports leagues are run by two companies, DraftKings and FanDuel, and earn money by taking a percentage, also known as a “rake,” of each player’s entry fee.
Under the legislation, fantasy sports operators will pay the state 10.5% of all revenues generated from fantasy players in New Jersey. The Office of Legislative Services has estimated that the state could generate up to $6.6 million a year in revenue, which would be deposited in the general fund.
The measure provides for the industry to be regulated and overseen by the state Division of Consumer Affairs, which is part of the Department of Law and Public Safety.
In a win for the industry, the legislation defined fantasy sports as games of skill rather than gambling, meaning fantasy gaming sites will not be regulated by the Division of Gaming Enforcement, which could have imposed more extensive regulations, such as those that govern casino operations.
DraftKings and FanDuel had retained Steven Perskie of Linwood’s Perskie Mairone Brog & Baylinson to represent their interests before the Legislature. Perskie, a retired Atlantic County Superior Court judge and former legislator who was instrumental in bringing legalized casino gambling to Atlantic City in the 1970s, told legislative committees earlier this year that he had studied fantasy sports and determined that it should be characterized as a game of skill rather than gambling because of a player’s need to evaluate the abilities and skills of particular athletes in order to build a fantasy roster.
The two companies initially opposed the legislation because it defined daily fantasy sports as sports wagering, but dropped their opposition to the legislation after the definition was changed.
During committee hearings, Caputo said fantasy sports sites generate $57 million a year in revenue nationally, with about $1.5 million of that coming from New Jersey.
The bill sets a number of conditions:
- If a fantasy sports site is operated by a casino, all servers must be located in Atlantic City.
- If a site is operated outside the state, at least one server must be located in Atlantic City.
- Participants must be at least 18 years old to play.
- Casinos and horse racing tracks will be allowed to enter into partnerships with other site operators.
- People on casinos’ self-exclusion lists will not be allowed to participate.
- Employees of fantasy sites will not be allowed to participate in games operated by other sites because of the possibility that they would be using information not available to other players.
- Daily fantasy sports operators will not be allowed to run games based on high school sports in New Jersey.
Michael Booth writes for the New Jersey Law Journal, an ALM sibling of Entertainment Law & Finance. He can be reached at email@example.com.
The views expressed in the article are those of the authors and not necessarily the views of their clients or other attorneys in their firm.