Virginia has become the first state with a law regulating the fast-growing but embattled online fantasy sports industry and specifying that fantasy sports betting is not “illegal gambling.”
Democratic Gov. Terry McAuliffe signed a bill Monday that formally legalizes and regulates sites such as FanDuel and DraftKings, requiring them to pay a $50,000 initial registration fee and submit to regular outside audits.
The law will take effect July 1. McAuliffe said in a written statement it will “empower Virginia to regulate this emerging industry and keep consumers safe from abuses.”
The Old Dominion is one of several states where DraftKings and FanDuel have pushed for legislation to regulate the new industry, but without the heavy oversight common with more traditional gambling operations.
“Virginia is leading the way in establishing strong consumer protections while sending a clear message that, with the proper oversight, playing fantasy sports is a skill-based hobby people should be allowed to enjoy,” said Republican Sen. Ryan McDougle, who sponsored the legislation.
Fantasy sports have been under fire in some states, and attorneys general in New York, Illinois and Texas have issued opinions that they are illegal games of chance. Fantasy site operators hope their success in Virginia will translate to other states.
“We thank Governor McAuliffe for his leadership and advocacy and are hopeful that other states across the country will follow Virginia's lead,” said Griffin Finan, a spokesman for DraftKings.
Virginia's legislation says fantasy players must be at least 18. California and Maryland are considering bills with a minimum age of 21. Massachusetts is also looking at a 21-year minimum, through a rule-making initiative outside the legislative process.
The Virginia legislation passed both chambers of the GOP-controlled General Assembly by wide margins with broad bipartisan support. But it was criticized in recent days by smaller fantasy site operators and anti-gambling addiction advocates.
Smaller fantasy sites that operate full-season fantasy games rather than one-day contests like DraftKings and FanDuel said the $50,000 registration fee is prohibitively expensive and will force them out of Virginia.
Darren Heitner, a South Florida lawyer who represents several fantasy sports operators, said if other states impose similar fees it would be difficult for smaller companies.
“They cannot justify spending such an exorbitant amount of money just to remain active in a single state,” Heitner said.
The National Council on Problem Gambling pushed McAuliffe to try amending the legislation and offering greater consumer protection provisions aimed at limiting fantasy-related gambling addictions.
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