Indiana’s Daily Fantasy Sports Market Dominated by DraftKings and FanDuel, Smaller Operators Fold
Posted on: July 5, 2017, 01:00h.
Last updated on: July 5, 2017, 11:37h.
Daily fantasy sports (DFS) companies aren’t rushing to buy into Indiana’s recently legalized market because they can’t justify the high entrance fee and strong competition from market bigwigs DraftKings and FanDuel.
Senate Bill 339 laid out regulations for DFS games in Indiana. The law requires platforms to apply for and receive an operating license at a cost of $50,000, and pay an annual renewal fee of $5,000. But to date, just three DFS companies, DraftKings, FanDuel, and FantasyDraft, have obtained licenses.
That’s likely because smaller operators don’t see the financial reward for paying the upfront price, as the state market, like so many others, is dominated by the aforementioned platforms.
Non-licensed fantasy sports operators have until Saturday to cease their services in Indiana. “Every party had plenty of notice,” Indiana Gaming Commission Executive Director Sara Tait told the Greensburg Daily News.
SB 339 was passed by the Indiana General Assembly and signed by then-Governor Mike Pence last March. The former governor was later recruited by Donald Trump to join his presidential campaign.
Eric Holcomb (R) succeeded Pence once the Trump ticket won the White House.
Law Hurts Small Business
Indiana passed SB 339 in order to give regulatory power of the contests to its state gaming commission. The $50,000 licensing fee is to cover the agency’s additional costs incurred from monitoring DFS platforms.
However, smaller daily fantasy networks say the fee essentially eliminates them from Indiana.
DraftKings and FanDuel control an estimated 90 percent of the DFS market. The Federal Trade Commission is currently blocking the two companies’ proposed merger on grounds that the union would create a monopoly.
Until Saturday, there are 13 other DFS companies offering internet contests to residents inside the Hoosier State. The smaller platforms have been legally operating under a temporary agreement with the state government.
They argue SB 339 is flawed in demanding a large upfront sum for licensing. Sites with lower revenues than DraftKings and FanDuel prefer states to tax proceeds. Indiana’s DFS law doesn’t do that.
Pay Now, Not Later
Indiana’s DFS scheme isn’t unique, but follows similar regulatory processes in other states.
Virginia became the first state to legalize daily fantasy sports in 2016. Its statute requires operators to pay $50,000 for a gaming license. New York, Massachusetts, Tennessee, Mississippi, Colorado, Missouri, Indiana, Kansas, Rhode Island, and Maryland soon followed with comparable legislation.
Arkansas and Vermont joined the DFS party in 2017.
While most require an upfront license fee, and some additionally tax gaming revenue, the New Jersey Legislature is taking a different approach.
In a bill that was approved this week by lawmakers in the Garden State and passed to Governor Chris Christie’s (R) desk, DFS companies there would only be required to direct 10.5 percent of their gross revenue to the state. Daily fantasy sites wouldn’t be required to obtain gaming licenses, and would instead be overseen by the state’s Division of Consumer Affairs.
“It’s a consumer protection measure as opposed to something we’re looking to make a ton of money off of,” State Sen. James Whelan (D-Atlantic City) explained. The former mayor of Atlantic City added, “Hopefully the governor will sign this and we’ll be able to keep daily fantasy sports going in New Jersey.
Christie famously said during a 2016 presidential debate about DFS, “Let the people play. Who cares!”
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