NFBC Is Officially Clear In New York

[Greg Ambrosius]

We're happy to report that today we officially were cleared by the state of New York with a license to come. CDM Fantasy Sports got their license yesterday and we followed today with approval to run our high-stakes events for New York residents.

Kudos to the state of New York for working with us. They recognized that our baseball event was different than a DFS contest and allowed us to move forward with plans while the license was being worked out. They knew we were hosting a live draft at the New York Hilton and bringing customers together. They worked with us and we got this done.

This clears a hurdle for baseball, football and basketball in New York. We continue to work with all of the states and hope to have our games available in all states that are reasonable in their fees. More updates to come as they happen.

Thanks all. Now LET'S PLAY BALL!!

[Glenneration X]

Great news Greg. All season long high stakes fantasy baseball players the state over just exhaled.

[Greg Ambrosius]

Great news Greg. All season long high stakes fantasy baseball players the state over just exhaled.

Now for the bad news: The state tax is 15.5% net revenue for all New York state residents. We are eating this cost this baseball season, but as every state has a fee we are going to have to look at this and come up with a plan to now pay what could be six-figures in annual taxes. It's no fun for anyone running season-long games. DFS companies have adjusted their prize pools to compensate for these expenses and we will have to do the same likely starting with football.

It's a consumer protection law, they say. Right?

[King of Queens]

Let's hope that there are allowances made for smaller companies, such as a sliding revenue scale as opposed to a flat 15.5% tax.

[Greg Ambrosius]

Let's hope that there are allowances made for smaller companies, such as a sliding revenue scale as opposed to a flat 15.5% tax.

That would be good, but so far I don't see it. Each state is treating every pay-to-play company pretty similarly. We have to make choices on each state now, which isn't fun. But at least there is some momentum for reasonable legislation like we're seeing in Texas and possibly other states.

[devilznj]

What would of happened if they did not approve you??

[Greg Ambrosius]

What would of happened if they did not approve you??

Then New York residents would have been exempt from the NFBC.

[Deadheadz]

Let's hope that there are allowances made for smaller companies, such as a sliding revenue scale as opposed to a flat 15.5% tax.

That would be good, but so far I don't see it. Each state is treating every pay-to-play company pretty similarly. We have to make choices on each state now, which isn't fun. But at least there is some momentum for reasonable legislation like we're seeing in Texas and possibly other states.

Do you see any potential for spreading the tax across all entrants in all non-banned states (and abroad) in the hopes of keeping the contests alive or will residents of different jurisdictions pay (or win) different amounts?
.

[Outlaw]

I guess you could hope no one wins from NY- or is the Tax on all players entry fees from NY?

[Glenneration X]

I think we should just apply all taxes to any Jersey winnings. With Massotto from that state, they should be bringing in all the big prizes anyway.

[Greg Ambrosius]

I guess you could hope no one wins from NY- or is the Tax on all players entry fees from NY?

No, that's not how they are calculating this. They are taking all revenue from New York minus the prizes and taking 15.5% of that net. It's not on winnings.

DFS companies have already adjusted their prize payouts, basically having all members from all states pay these fees. Season-long game operators will likely have to do the same, lowering the payout percentages to cover these massive taxes.

[King of Queens]

Compare the eligibility requirements of the NFBC to those of DK/FD:

NFBC Eligibility - 6 excluded states
The National Fantasy Baseball Championship is open to individuals who are at least 18 years of age (or the age of majority in your state of residence) and are a resident of the United States of America or Canada. Notwithstanding the foregoing, residents of Washington State, Louisiana, Montana, Arizona, Virginia and Iowa are not eligible to register or play in the NFBC. All registrations must be in the full legal name of the primary team owner, though owners will have the option to add a co-manager(s).


DraftKings Eligibility - 10 excluded states
You must be at least eighteen (18) years of age to open an account, participate in contests, or win prizes offered by the Website. In jurisdictions, territories, and locations where the minimum age for permissible use of the Website is greater than eighteen (18) years old, you must meet the age requirement in your local jurisdiction or territory. You must be at least nineteen (19) years of age at time of account creation if you are a legal resident of Alabama or Nebraska or twenty-one (21) years of age if you are a legal resident of Massachusetts. Legal residents physically located in any of the fifty (50) states and Washington, DC, excluding Alabama, Arizona, Delaware, Hawaii, Idaho, Iowa, Louisiana, Montana, Nevada and Washington (the “Excluded States”) are eligible to open an account and participate in contests offered by the Website. Legal residents of the Excluded States are eligible to open and maintain accounts on the Website for use only in games that do not offer prizes. However, legal residents of Alabama, Delaware, or Idaho who are physically located outside of the Excluded States are eligible to deposit funds, enter contests and earn prizes offered by the Website. Legal residents of Canada are eligible to open an account and participate in contests offered by the Website.

FanDuel Eligibility - 11 excluded states
By depositing money or entering a contest, you are representing and warranting that:
* you are of 18 years of age or older (21 years of age or older in Massachusetts)
* you are a citizen or resident of the United States of America or Canada and that you have an address in the United States of America or Canada;
* at the time of deposit or game entry you are physically located in the United States of America or Canada in a jurisdiction in which participation in the contest is not prohibited by applicable law;
* you are not listed on any U.S. Government list of prohibited or restricted parties;
* you will abide at all times by these Terms of Use and any other agreements between you and FanDuel regarding your use of the Service or participation in games;
* when depositing funds or entering a paid contest, you are not physically located in of any of the following states: Alabama, Arizona, Delaware, Hawaii, Idaho, Iowa, Louisiana, Montana, Nevada, Texas or Washington;
* you are not subject to backup withholding tax because: (a) you are exempt from backup withholding, or (b) you have not been notified by the Internal Revenue Service (IRS) that you are subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified you that you are no longer subject to backup withholding.
* When entering any contest that awards prizes, you are not an employee or operator of another daily fantasy site that charges entrance fees or offers cash prizes
* You do not, by virtue of affiliation with another daily fantasy site, have access to the site’s pre-release non-public confidential data about contest-related information.

[Rainiers]

I guess you could hope no one wins from NY- or is the Tax on all players entry fees from NY?

No, that's not how they are calculating this. They are taking all revenue from New York minus the prizes and taking 15.5% of that net. It's not on winnings.

DFS companies have already adjusted their prize payouts, basically having all members from all states pay these fees. Season-long game operators will likely have to do the same, lowering the payout percentages to cover these massive taxes.

On the bright side..getting shaved is a thousand times better than getting scalped. Overall, this is very good news IMHO

Great job, Greg.

[Rainiers]

Compare the eligibility requirements of the NFBC to those of DK/FD:

NFBC Eligibility - 6 excluded states
The National Fantasy Baseball Championship is open to individuals who are at least 18 years of age (or the age of majority in your state of residence) and are a resident of the United States of America or Canada. Notwithstanding the foregoing, residents of Washington State, Louisiana, Montana, Arizona, Virginia and Iowa are not eligible to register or play in the NFBC. All registrations must be in the full legal name of the primary team owner, though owners will have the option to add a co-manager(s).


DraftKings Eligibility - 10 excluded states
You must be at least eighteen (18) years of age to open an account, participate in contests, or win prizes offered by the Website. In jurisdictions, territories, and locations where the minimum age for permissible use of the Website is greater than eighteen (18) years old, you must meet the age requirement in your local jurisdiction or territory. You must be at least nineteen (19) years of age at time of account creation if you are a legal resident of Alabama or Nebraska or twenty-one (21) years of age if you are a legal resident of Massachusetts. Legal residents physically located in any of the fifty (50) states and Washington, DC, excluding Alabama, Arizona, Delaware, Hawaii, Idaho, Iowa, Louisiana, Montana, Nevada and Washington (the “Excluded States”) are eligible to open an account and participate in contests offered by the Website. Legal residents of the Excluded States are eligible to open and maintain accounts on the Website for use only in games that do not offer prizes. However, legal residents of Alabama, Delaware, or Idaho who are physically located outside of the Excluded States are eligible to deposit funds, enter contests and earn prizes offered by the Website. Legal residents of Canada are eligible to open an account and participate in contests offered by the Website.

FanDuel Eligibility - 11 excluded states
By depositing money or entering a contest, you are representing and warranting that:
* you are of 18 years of age or older (21 years of age or older in Massachusetts)
* you are a citizen or resident of the United States of America or Canada and that you have an address in the United States of America or Canada;
* at the time of deposit or game entry you are physically located in the United States of America or Canada in a jurisdiction in which participation in the contest is not prohibited by applicable law;
* you are not listed on any U.S. Government list of prohibited or restricted parties;
* you will abide at all times by these Terms of Use and any other agreements between you and FanDuel regarding your use of the Service or participation in games;
* when depositing funds or entering a paid contest, you are not physically located in of any of the following states: Alabama, Arizona, Delaware, Hawaii, Idaho, Iowa, Louisiana, Montana, Nevada, Texas or Washington;
* you are not subject to backup withholding tax because: (a) you are exempt from backup withholding, or (b) you have not been notified by the Internal Revenue Service (IRS) that you are subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified you that you are no longer subject to backup withholding.
* When entering any contest that awards prizes, you are not an employee or operator of another daily fantasy site that charges entrance fees or offers cash prizes
* You do not, by virtue of affiliation with another daily fantasy site, have access to the site’s pre-release non-public confidential data about contest-related information.

Really, really surprised by the differences. I like Fan Duels attorneys the best.

[cfolson]

DFS companies have already adjusted their prize payouts, basically having all members from all states pay these fees. Season-long game operators will likely have to do the same, lowering the payout percentages to cover these massive taxes.

Lowering payouts overall will just drive players away. Players registering from states with extra fees should pay more. This provides an incentive to use co-managers from lower cost states and, therefore, lower overall player costs.

[King of Queens]

DFS companies have already adjusted their prize payouts, basically having all members from all states pay these fees. Season-long game operators will likely have to do the same, lowering the payout percentages to cover these massive taxes.

Lowering payouts overall will just drive players away. Players registering from states with extra fees should pay more. This provides an incentive to use co-managers from lower cost states and, therefore, lower overall player costs.

https://www.gaming.ny.gov/ifs/IFS%20Statute.pdf

§ 1407. STATE TAX. FOR THE PRIVILEGE OF CONDUCTING INTERACTIVE FANTASY SPORTS CONTESTS IN THE STATE, REGISTRANTS SHALL PAY A TAX EQUIVALENT TO FIFTEEN PERCENT OF THEIR INTERACTIVE FANTASY SPORTS GROSS REVENUE GENERATED WITHIN THE STATE; IN ADDITION, REGISTRANTS SHALL PAY A TAX EQUAL TO ONE-HALF OF ONE PERCENT, BUT NOT TO EXCEED FIFTY THOUSAND DOLLARS ANNUALLY.

"INTERACTIVE FANTASY SPORTS GROSS REVENUE" SHALL MEAN THE AMOUNT EQUAL TO THE TOTAL OF ALL ENTRY FEES NOT ATTRIBUTABLE TO NEW YORK STATE PROHIBITED SPORTS EVENTS THAT A REGISTRANT COLLECTS FROM ALL PLAYERS, LESS THE TOTAL OF ALL SUMS NOT ATTRIBUTABLE TO NEW YORK STATE PROHIBITED SPORTS EVENTS PAID OUT AS WINNINGS TO ALL PLAYERS, MULTIPLIED BY THE RESIDENT PERCENTAGE FOR NEW YORK STATE; PROVIDED, HOWEVER, THAT THE TOTAL OF ALL SUMS PAID OUT AS WINNINGS TO PLAYERS SHALL NOT INCLUDE THE CASH EQUIVALENT VALUE OF ANY MERCHANDISE OR THING OF VALUE AWARDED AS A PRIZE.

"RESIDENT PERCENTAGE" SHALL MEAN, FOR EACH INTERACTIVE FANTASY SPORTS CONTEST, THE PERCENTAGE, ROUNDED TO THE NEAREST TENTH OF A PERCENT, OF THE TOTAL ENTRY FEES COLLECTED FROM PLAYERS LOCATED IN NEW YORK STATE, DIVIDED BY THE TOTAL ENTRY FEES COLLECTED FROM ALL PLAYERS IN INTERACTIVE FANTASY SPORTS CONTESTS NOT PROHIBITED IN NEW YORK STATE.

Reading this carefully, If a New York resident is not physically in New York when the contest is entered or the entry fee is actually paid, wouldn't that be a way around the "resident percentage"?

[KJ Duke]

DFS companies have already adjusted their prize payouts, basically having all members from all states pay these fees. Season-long game operators will likely have to do the same, lowering the payout percentages to cover these massive taxes.

Lowering payouts overall will just drive players away. Players registering from states with extra fees should pay more. This provides an incentive to use co-managers from lower cost states and, therefore, lower overall player costs.

Paying 15.5% of the vig, or appx 3% of the entry fee for those residents, shouldn't be a game killer dropping payout for NYers from 80% to 77%. Median incomes in NY are probably well above most other states anyway. Great news vs losing these players, for sure.

[Greg Ambrosius]

DFS companies have already adjusted their prize payouts, basically having all members from all states pay these fees. Season-long game operators will likely have to do the same, lowering the payout percentages to cover these massive taxes.

Lowering payouts overall will just drive players away. Players registering from states with extra fees should pay more. This provides an incentive to use co-managers from lower cost states and, therefore, lower overall player costs.

Paying 15.5% of the vig, or appx 3% of the entry fee for those residents, shouldn't be a game killer dropping payout for NYers from 80% to 77%. Median incomes in NY are probably well above most other states anyway. Great news vs losing these players, for sure.

The problem is that this is a moving target as more and more states add these fees and taxes. You have Tennessee, Missouri, Virginia and others that we are also dealing with. Pennsylvania, Texas and California are likely next. So it would be tough to hit each individual resident from these states. But we'll see. We have to figure this out before football, that's for sure.

[TOXIC ASSETS]

What would prevent an individual who lives in say, Arizona (one of my favorite states, but a bad one for fantasy sports)....from driving across the border to New Mexico and obtaining a Post Office Box? And then entering an NFBC / Fanduel / Draftkings contest? Just wondering -- in case the ever expanding government regulations in this area make their way to Pennsylvania.

[Bjs2025]

What would prevent an individual who lives in say, Arizona (one of my favorite states, but a bad one for fantasy sports)....from driving across the border to New Mexico and obtaining a Post Office Box? And then entering an NFBC / Fanduel / Draftkings contest? Just wondering -- in case the ever expanding government regulations in this area make their way to Pennsylvania.

Hopefully yinz'll be ok

[Deadheadz]

What would prevent an individual who lives in say, Arizona (one of my favorite states, but a bad one for fantasy sports)....from driving across the border to New Mexico and obtaining a Post Office Box? And then entering an NFBC / Fanduel / Draftkings contest? Just wondering -- in case the ever expanding government regulations in this area make their way to Pennsylvania.

Wouldn't it be more relevant where you get your mail from the IRS? If you win a prize won't the tax form include your official address?
.

[Greg Ambrosius]

What would prevent an individual who lives in say, Arizona (one of my favorite states, but a bad one for fantasy sports)....from driving across the border to New Mexico and obtaining a Post Office Box? And then entering an NFBC / Fanduel / Draftkings contest? Just wondering -- in case the ever expanding government regulations in this area make their way to Pennsylvania.

States like New York and Tennessee are asking all of us game operators to use GEO locators to identify where the signups are coming from. It's not an inexpensive addition to all of our businesses. These states appear to want to tax us on all charges made within the state at the time of signups so that they can generate tourism revenue from people who are in the state and want to add DFS teams. They feel they can generate more revenue that way, which I understand with DFS. But for season-long, our guys don't sign up for NFBC contests while on vacation. They do it from their residences as they prepare for the season ahead. So I'm not sure this is the right way for season-long game operators.

But we'll abide by what they say and report taxes accordingly. Sound good?

[TOXIC ASSETS]

What would prevent an individual who lives in say, Arizona (one of my favorite states, but a bad one for fantasy sports)....from driving across the border to New Mexico and obtaining a Post Office Box? And then entering an NFBC / Fanduel / Draftkings contest? Just wondering -- in case the ever expanding government regulations in this area make their way to Pennsylvania.

States like New York and Tennessee are asking all of us game operators to use GEO locators to identify where the signups are coming from. It's not an inexpensive addition to all of our businesses. These states appear to want to tax us on all charges made within the state at the time of signups so that they can generate tourism revenue from people who are in the state and want to add DFS teams. They feel they can generate more revenue that way, which I understand with DFS. But for season-long, our guys don't sign up for NFBC contests while on vacation. They do it from their residences as they prepare for the season ahead. So I'm not sure this is the right way for season-long game operators.

But we'll abide by what they say and report taxes accordingly. Sound good?

They have got their greedy, grubby hands in everything, don't they Greg. I'm just trying to think ahead and beat the system if need be. This stuff has been a fun part of my life for a long time and I'd hate to see the government ruin it by making a money grab. So for my Arizona example -- sounds like the way to go is to drive into one of the surrounding states, set up a P.O. Box and then use a mobile device (or public computer) to register for an event while you're there. But you didn't hear that from me, it's just idle message board ramblings.....

[Greg Ambrosius]

Ohio just introduced a DFS bill that would require a $30,000 licensing fee to take Ohio residents. $50,000 here, $30,000 there, $15,000 here, $30,000 there, it just keeps coming from 50 states who never bothered with fantasy sports before. DFS is very different from season-long, but nobody is making the distinction with this licensing fees.

The biggest concern is that it's nearly impossible right now for any new season-long company to come into the space. I mean how does a small upstart company pay all of these state fees to create a game that could take years to be profitable? If all of these fees were in place in 2004 when I introduced the NFBC we never would have gotten off the ground. We are established now and have an advantage and will pay some of these state fees, but how does anyone come in and compete with me as a new season-long pay-to-play game operator? The barrier to entry is too high.

The states are stunting the growth of fantasy sports more than consumer protection. I know they believe they are doing right with all of these laws, but what they are really doing is creating a big, big wall that prevents innovation and newcomers to enter the space.

[MadCow Sez]

Ohio just introduced a DFS bill that would require a $30,000 licensing fee to take Ohio residents. $50,000 here, $30,000 there, $15,000 here, $30,000 there, it just keeps coming from 50 states who never bothered with fantasy sports before. DFS is very different from season-long, but nobody is making the distinction with this licensing fees.

The biggest concern is that it's nearly impossible right now for any new season-long company to come into the space. I mean how does a small upstart company pay all of these state fees to create a game that could take years to be profitable? If all of these fees were in place in 2004 when I introduced the NFBC we never would have gotten off the ground. We are established now and have an advantage and will pay some of these state fees, but how does anyone come in and compete with me as a new season-long pay-to-play game operator? The barrier to entry is too high.

The states are stunting the growth of fantasy sports more than consumer protection. I know they believe they are doing right with all of these laws, but what they are really doing is creating a big, big wall that prevents innovation and newcomers to enter the space.

I'm going to engage where I am allowed in Ohio. I have contacts I can leverage to try to get my opinion heard. Wayne's very nice narrative will be my foundation