Lawmakers Could Redefine Prop-Style DFS As Sports Betting

Written By Tebearau Egbe on July 2, 2024
The Virginia state house where lawmakers could consider new DFS regulations

Virginia is the most recent state to consider whether prop-style Daily Fantasy Sports (DFS) is a form of sports betting.

According to Del. Paul Krizek, District 16, fantasy sports is a “compliance nightmare” that “needs to be reined in,” and he plans to introduce legislation for the 2025 General Assembly session clarifying what classifies  as Virginia sports betting.

Krizek, also a member of the state’s gambling law subcommittee, proposes additional amendments. These include raising the minimum age for fantasy sports from 18 to 21.

Fantasy sports growing resemblance to sports betting spurs scrutiny

Questions have been raised about why fantasy sports are now facing increased scrutiny. The primary reason is that fantasy sports have come to resemble traditional sports betting. Virginia sports betting involves wagering on the outcomes of sporting events, such as predicting which team will win or lose and the point spread of the game.

On the other hand, fantasy sports are skill-based competitions where participants assemble virtual teams of real athletes. Players wager on athlete performance, with cash prizes awarded based on how their team performs compared to others. While fantasy sports were initially seen as distinct from traditional sports betting due to their emphasis on skill, the lines have blurred, prompting calls for stricter regulation to address these similarities.

Fantasy sports now include proposition bets, or “pick ’em” bets, on platforms like PrizePicks and Underdog Fantasy. This means that, in addition to the traditional format where a fantasy player assembles a roster of athletes from various teams and measures that roster’s statistical performance against an opponent’s roster, the modern approach allows users to predict specific athlete performances without direct competition against other fantasy players.

This has caused lawmakers to cast doubt on the safety of allowing individuals under 21 to participate, especially considering its increasing resemblance to full-scale gambling activities. Compounding this concern is the fact that the state does not benefit from the revenue generated by these wagers due to exemptions from gambling taxes.

“I think they’re kind of taking advantage of the lack of regulatory oversight,” Krizek said.

Last year, the state’s attorney general, Jason S. Miyares declared that pick’em games constitute sports betting. Therefore, operators offering such games should hold a Virginia sports betting license.

John Mohrmann, a lobbyist for DraftKings, also said in a recent meeting that not addressing the issue will lead to confusion.

Coalition for Fantasy Sports commits to cooperation with potential changes

The Coalition for Fantasy Sports (CFS), comprising PrizePicks, Underdog Fantasy, Betr, and Dabble, seems to be cooperating, as its executive director, JT Foley, said they support effective regulations for fantasy contests.

“As licensed operators, we look forward to working with legislators now and in the future to ensure all fantasy contests are regulated appropriately and Virginians get to continue to play the games they love.”

While amenable to regulations within the fantasy sports industry, the larger question from Virginia lawmakers is whether sports betting regulations should subsume prop-style DFS products.

Currently, states such as New York, Michigan, and Florida have already prohibited pick’em style games. Earlier this year, the NCAA urged states to ban college proposition bets due to concerns over athlete harassment.

Revenue is a major concern in DFS reform

While traditional sportsbook apps allocate funds from their proceeds to support gambling addiction programs, fantasy apps do not.

To operate as a sports betting operator in Virginia, companies must comply with regulations set by the Virginia Lottery. These include a $250,000 application fee for licensing along with an annual renewal fee of $200,000. In contrast, fantasy sports operators overseen by the Virginia Department of Agriculture and Consumer Services (VDACS) are subject to an $8,500 initial permit fee and annual renewal fees.

At this juncture, lawmakers have not decided how to resolve the ambiguity surrounding fantasy sports. Will they consider a complete ban on DFS, treat them similarly to legal sportsbooks, or restrict DFS to its traditional format while limiting proposition bets to sports betting only? Only time will tell.

The Old Dominion State anticipates significant changes in its gambling landscape in 2025. Apart from potential DFS reforms, lawmakers advocate for State Bill 675, introduced by Sen. David Marsden. The bill aims to authorize a casino in Fairfax County by 2025. Proponents argue that a casino could offset potential declines in commercial tax revenue in Virginia’s most populous county.

Meanwhile, last month, Virginia sportsbooks saw a 32% year-0ver-year growth in handle. This continues the 2024 trend of outpacing last year’s totals.

Photo by Steve Helber / AP Images
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Tebearau Egbe

Tebearau Egbe covers sports betting beats at PlayVirginia and PlayUSA. Her previous roles include contributor at Esportbet, Bettingplanet, Onlinecasino, and several other publications. Armed with a bachelor's degree in philosophy from Niger Delta University in Bayelsa State and a master's degree in philosophy from the University of Lagos, Nigeria, Tebearau possesses a unique ability to dissect complex industry developments, distilling them into insightful narratives that captivate readers. Based in Lagos, Nigeria, she enjoys good laughter with friends when she’s not chasing the latest casino developments or delving into the intricacies of the betting world.

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