At an Illinois Senate Gaming, Wagering and Racing Committee meeting on Tuesday, lawmakers were urged not to give major online sportsbooks preferential treatment if the state legalizes daily fantasy sports.
Two DFS proposals were the major topic of the day: Sen. Lakesia Collins’ SB 1224 and Sen. Bill Cunningham’s SB 2145. Both would legalize and regulated DFS, albeit under different terms.
Collins’ proposal would authorize both peer-to-peer (P2P) and against-the-house contests and tax the vertical at between 10 and 15%. A similar bill was passed out of a House committee last year before stalling.
CommitTee chair Cunningham’s alternative framework would allow only P2P contests and provides for a tiered tax structure based on adjusted gross receipts that mirrors the approved new structure for sports betting that came into effect last year, up to a high rate of 40%.
PrizePicks stresses DFS is not sports betting
Collins stated in introducing her bill that “the industry preferred this bill over Senate Bill 2145 because it preserves consumer choice” by regulating against-the-house DFS as well as peer-to-peer contests. Some states have scrutinized against-the-house DFS by suggesting that it essentially equates to typical sports betting.
Speaking in support, PrizePicks representative Shane Saum stressed that against-the-house DFS offers far greater revenue potential because it is “significantly more popular than the peer-to-peer product.”
After Sen. Cristina Castro suggested that it’s understandable that parallels have been drawn between against-the-house and typical sports betting, Saum stressed that while similarities exist, operators like PrizePicks do not get to offer typical wagering products like moneylines, props, parlays or in-game betting.
“The example we always give folks is you can put a glass of orange juice next to a mimosa, and they may look alike, but they are definitely not the same,” he said.
Opposing Collins’ proposal were the likes of PENN Entertainment and Joe Miller, director of policy at the Illinois Gaming Board (IGB).
Miller argued that the bill would unnecessarily limit the IGB’s regulatory authority, “putting the onus on the IGB to enforce industry whims, rather than on the fantasy sports industry to comply with regulation and oversight.” He also cited concerns that ambiguity in the language could feasibly lead to sportsbooks claiming they take part in DFS to evade higher sports betting tax.
Don’t shut us out, plead DFS operators
Miller and the IGB worked on Cunningham’s competing bill with the senator, which would only regulate P2P DFS and would tax it similarly to sports betting. But others were not so keen on that alternative.
Bartlett Cleland of online trade association NetChoice, of which PrizePicks is a member, contested that Cunningham’s bill would “lock in market control by the largest sports betting operators.”
Tim Jensen, COO of fantasy operator Real Time Fantasy Sports, noted the proposed $500,000 licensing fee would “effectively lock us out.” He pointed to states like Pennsylvania and New Jersey, whose tiered licensing fee systems he said allow smaller operators to stay afloat and boost consumer choice.
“All we’re asking respectfully is to not close the door on small and medium operators that offer traditional season-long fantasy supports that the big DFS only companies do not offer,” he said.
Underdog also pushed back. SVP Stacie Stern said the company would remain neutral on Cunningham’s bill “until the tax rate reflects the difference in how a fantasy contest operates versus how a sportsbook operates.”
“Fantasy contests generate between 1/20th and 1/30th of the monthly revenue that sportsbooks generate,” she asserted. “This distinction in volume is why 23 state legislatures have opted to tax fantasy contests somewhere in a reasonable range of 6% to 15%.”
To that point, Collins argued that SB 1224 recognizes that fact and that her suggested tax range of 10 to 15% is in line with most other states.
Miller acknowledged that SB 2145 proposed graduated tax rate and half-million-dollar license fee are up for negotiation with operators.
