New Jersey Latest State to Regulate, Tax Fantasy Sports

Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...

By John Herzfeld

Fantasy sports companies welcomed Gov. Chris Christie’s (R) Aug. 24 approval of a New Jersey bill ( A-3532/S-1927) regulating and taxing the multibillion-dollar industry’s activities in the state.

The new law “establishes multiple layers of oversight, placing New Jersey at the forefront of consumer protection nationally, and creating a new source of tax revenue with major potential for growth in the state,” Marc La Vorgna, a spokesman for FanDuel Inc. and DraftKings Inc., said in a statement.

The New Jersey law will raise $6.6 million in annual revenue, according to the bill’s fiscal note. Fantasy sports operators must pay, on a quarterly basis, “an operations fee in an amount equal to 10.5 percent of fantasy sports gross revenue.”

Nearly 1.5 million people in New Jersey participate in fantasy sports, La Vorgna said. The Fantasy Sports Trade Association (FSTA) estimates that 59.3 million people play the games in the U.S. and Canada, supporting a $7.22 billion industry.

Fantasy sports are defined under the New Jersey law as simulated games with an entry fee in which a participant owns or manages an imaginary team and competes against other participants or a target score for a predetermined prize.

Player Protections

Legislative sponsors said the law officially authorizes and taxes large-scale fantasy sports while adding protections from unfair practices and other abuses.

“The fantasy sports industry is a growing market year after year,” Assemblyman Vince Mazzeo (D) said in a statement. “The time is right for New Jersey to enter the fold with regulations aimed at providing strong consumer protections for our residents.”

The law also “promotes a positive business environment” for fantasy sports operators, he said.

Peter Schoenke, chairman of the FSTA and president of Roto Sports Inc., said in a statement that the New Jersey law “clarifies fantasy sports are games of skill, includes common sense consumer protection measures, and can work for all sizes and types of our member companies.”

Joining Other States

According to the FSTA, other states that have legalized and tax or impose fees on daily fantasy sports are Arkansas, Delaware, Indiana, Maine, Mississippi, Missouri, Tennessee, Vermont, and Virginia.

Other states that have legalized the industry but don’t impose a tax or fee include Colorado, Kansas, Maryland, Massachusetts, and New Hampshire. Attorneys General in Rhode Island and West Virginia have issued opinions saying fantasy sports are legal in their states, but their respective legislatures haven’t passed legislation.

To contact the reporter on this story: John Herzfeld in New York at jherzfeld@bna.com

To contact the editor responsible for this story: Jennifer McLoughlin at jmcloughlin@bna.com

For More Information

Text of the law is at http://src.bna.com/rXG.

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