Like NY, PA May Soon Tax Fantasy Sports

HARRISBURG – The House ventured into the national debate over fantasy sports Wednesday, with a committee unanimously approving legislation to regulate and tax the contests.

The bill calls for fantasy sports operators to obtain state licenses, then pay a levy equal to 5 percent of their revenue – entry fees minus prizes – multiplied by a percentage representing their business from Pennsylvania.

Supporters say it’s unclear how much new revenue the cash-strapped commonwealth could gain, though it would likely not be enough to change its budget woes. But the proposed step mirrors a national wave to bring oversight to what some say has been a wildly popular but unregulated form of gambling.

“Fantasy sports is occurring right now, with or without this legislation,” said Rep. John Payne (R., Dauphin), chairman of the Gaming Oversight Committee, before the panel voted to send its bill on to the full House.

Fantasy sports, in which players build fictional teams with real athletes and then compete based on their performances, were exempted from a 2006 federal law on illegal online gambling.

But a wave of states began examining regulation or taxing the sport after two of the most prominent operators, DraftKings and FanDuel, mounted an aggressive advertising campaign during the 2015 football season, according to a May report from the Gaming Control Board.

At the same time, allegations surfaced of league employees making bets using insider information, as well as claims that most profits flow to a small percentage of players.

States have since taken varying approaches, with some banning fantasy sports and others permitting the contests.

But players still flock to the games. The Fantasy Sports Trade Association says 56.8 million people in the United States and Canada played in 2015, up from 41.5 million the previous year.

In Pennsylvania, roughly two million people play some kind of fantasy sport, according to an estimate by Fantasy Sports for All, an advocacy group that received its initial funding from DraftKings and FanDuel.

Supporters of the Pennsylvania bill say regulating the contests will allow the state to keep minors out and protect compulsive gamblers from getting in too deep.

The measure would ban players younger than 18, and allow participants to restrict themselves from entering contests and set limits for the amount of entry fees they can pay in a given time.

Despite the state’s need for new sources of revenue, the proposal’s prime sponsor, Rep. George Dunbar (R., Westmoreland), downplayed the potential winnings for the state. He said the proposal might generate $1 million to $2 million per year at the start, though he said any projection was “a shot in the dark.”

“It’s not going to fix our budgetary woes,” he said. “It will be a small amount of money in the grand scope of things.”

In an uncertain environment, fantasy sports operators seem to be seeing advantages to regulation.

Marc La Vorgna, a spokesman for Fantasy Sports for All, said the group supported the Pennsylvania bill.

“We want to have legal clarity,” he said, adding: “There should be basic consumer protection rules that businesses have to operate by.”

DraftKings also said it supported the proposal.

“Today the Pennsylvania legislature took another important step toward enacting a commonsense regulatory framework that protects fantasy sports competitors in the commonwealth,” Griffin Finan, director of public affairs for DraftKings, said in a statement. “We are grateful for the continued opportunity to advocate for our Pennsylvania fans and guarantee their right to play the games they love.”

It was not clear if the House would move quickly to take up the legislation.