Fantasy Sports Tax, Pro Sports Betting Panel Featured in Donoghue Bill

Source: State House News Service

By Colin A. Young

BOSTON — With the legal status of daily fantasy sports set to expire in about five months, Sen. Eileen Donoghue has proposed making the popular fantasy contests permanently legal, putting the Massachusetts Gaming Commission in charge of overseeing the industry and levying a 15 percent tax on game operators.

Donoghue said her bill (SD 2480) builds upon the findings and recommendations of a special commission she helmed last year and attempts to establish a regulatory structure for daily fantasy sports (DFS) that protects players, benefits the state and doesn’t hinder further growth in the industry.

“I do think it’s important that we deal with this in a way that clarifies things. I think we have a lot more information than we did two years ago in terms of the nature of the industry, what’s happened here and in other countries and states, and how it’s been treated,” Donoghue said Monday afternoon. “We want to deal fairly with them and encourage what is an emerging industry.”

In 2016, after DFS had exploded into the mainstream with an advertising blitz, the Legislature cleared up what had been something of a grey area by adding a provision to an economic development law deeming “fantasy contests” legal.

The temporary legal authority the Legislature granted for fantasy contests is set to expire July 31, 2018 unless lawmakers again give DFS the green light.

Donoghue’s bill makes online daily fantasy sports contests exempt from the state’s prohibition on “illegal gaming” and creates a new chapter devoted to the regulation of daily fantasy sports. Daily fantasy sports operators — like Boston-based DraftKings and FanDuel — would be required to register with the Massachusetts Gaming Commission, pay a registration fee of as much as $100,000 and be approved by the Gaming Commission to operate.

Once approved to offer DFS games, the DFS operator would be required by Donoghue’s bill to pay a 15 percent tax on its gross revenue. Donoghue said she settled on a 15 percent tax — a lower tax rate than the state’s casinos will be required to pay — after talking to the DFS industry and looking at the tax rate in New York and Pennsylvania.

“The brick and mortar casinos are paying 25 percent under the gaming statute, but we did hear from the industry that they operate on smaller margins,” Donoghue said.

It would be up to the Gaming Commission to draft and promulgate DFS regulations that ensure fairness in gameplay, require the use of geolocation to verify that no player is located outside of Massachusetts, impose a minimum age requirement of 21 years old, lay out standards for fighting compulsive gambling, require messages about responsible gaming be displayed prominently, ensure player data security and more.