California lawmakers moved Wednesday to regulate the booming daily fantasy sports industry despite uncertainty around whether the contests are a form of gambling and if the Legislature has authority over the issue.
Responding to the surging popularity of sites like DraftKings and FanDuel – and to a legal backlash in other states seeking to prohibit the sites on the grounds that they offer illegal gambling – Assembly Bill 1437 would authorize California companies to offer Internet fantasy sports after obtaining licenses from the California Department of Justice. It passed the Assembly Governmental Organization Committee on a 17-1 vote.
Daily fantasy sports sites allow players to place bets on the performance of individual athletes. Online fantasy sports have drawn 56.8 million users in North America, according to a bill analysis. Advertisements dangling huge cash payouts have become commonplace during breaks in televised sporting events.
Millions of our constituents in California (are) participating in this activity right now, today, unprotected.
Assemblyman Adam Gray, D-Merced
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“Millions of our constituents in California (are) participating in this activity right now, today, unprotected. Nothing in place to guard against some of dangers we know exist,” said Assemblyman Adam Gray, D-Merced, the bill’s author. “We have an obligation to move forward.”
Policymakers around the country are grappling with whether daily fantasy sports represent a game of skill or a game of luck – in other words, gambling. Industry representatives point to the range of ability among players as evidence that it is a game of skill.
Some states already prohibit daily fantasy sports, deeming the activity a form of illegal gambling. Attorneys general in New York and Illinois have moved to shut down the activity for the same reason. Regulators in Nevada ruled that daily fantasy sports amount to gambling and ordered websites to cease operation because they had not obtained gambling licenses.
California Attorney General Kamala Harris, whose Justice Department would distribute daily fantasy licenses under Gray’s bill, has not publicly weighed in. She declined through a spokeswoman to comment on potential or ongoing investigations.
But lawmakers sparred on Wednesday over how to properly characterize daily fantasy sports.
Assemblyman Marc Levine, D-San Rafael, argued emphatically that the activity is a form of gambling, noting that the text and title of the bill repeatedly use the word “gambling” and pointing out that it was being heard in a committee whose jurisdiction includes games of chance. He said legislators had no constitutional authority to act without putting the issue before voters.
This is gambling. There’s no doubt about it. Let’s not fool ourselves.
Assemblyman Marc Levine, D-San Rafael
“This is gambling. There’s no doubt about it. Let’s not fool ourselves,” Levine said. “An entry fee is a wager; cash prizes are gambling winnings; (daily fantasy sports companies) are bookies.”
Other lawmakers questioned the game’s nature but said it was preferable to act now as the legal issue plays out.
“Whether it ultimately is legal or illegal, I think that’s for others to decide,” said Assemblyman Scott Wilk, R-Santa Clarita, who voted for the bill. “I think it’s for us to do what we can do to protect our constituents.”