The bill was multi-faceted gaming legislation that also authorizes online gambling and video game terminals (VGTs). It also sets up a future framework for sports betting — placing it into law immediately.
Age changes for DFS players, familiar regulations for companies
The new regulations shouldn’t result in many consumer-facing changes for the individual DFS player in Pennsylvania.
There is one notable exception: those wishing to participate in paid-entry contests will have to be at least 21 years of age. The bill also sets forth a series of requirements that DFS companies operating in the state must abide by.
Among them, operators will pay $50,000 for five years’ worth of licensure to operate in the state. There will also be a $10,000 renewal fee. Additionally, 15 percent of the gross revenues they derive from Pennsylvania customers will go towards the state’s coffers. Both amounts are in line with what operators are already expending to do business in several other states.
The Pennsylvania Gaming Control Board will serve as the governmental entity that ensures DFS operators are complying with all aspects of the new law. These include consumer protections, such as problem gaming protocols and regulations regarding the segregation of player funds from operational funds.
Many DFS operators have such processes in place, considering they mirror what most of the other 16 states that have formally legalized DFS already require. Pennsylvania becomes the second of the country’s top 10 most populous states to legalize and regulate DFS, joining New York.
Most, if not all, operators likely to continue business in PA
The licensure fee and tax obligtaions that H271 imposes on DFS operators aren’t exceedingly burdensome. Unsurprisingly, the industry’s Big Two, DraftKings and Fanduel, have already embraced the new regulations.
The next tier of operators, including Yahoo and FantasyDraft, are also likely to continue doing business in the state. The fact that industry estimates place the amount of revenue from Pennsylvania’s 65,000 DFS players at $7.5 million essentially ensures that.
Potential future synergy with legalized sports betting?
The portion of H271 that legalizes sports betting potentially opens up a door, albeit a highly uncertain one, for Pennsylvania residents to someday partake in single-game wagering alongside a DFS operator’s traditional salary cap-based contests. DraftKings has at least expressed what could be termed an “open mind” to dipping a toe in sports gambling waters if the activity was legalized.
Whether the industry heavyweight would be willing to do so prior to a federal regulatory framework for sports wagering being in place is another question. On one hand, working out the kinks on the state level would be considerably less overwhelming than doing so nationwide.
Conversely, entering the market for the first time in Pennsylvania – where the law calls for a $10 million sportsbook licensure fee and subjects a total of 36 percent of gross revenue from sports wagering to taxation – might prove to be a costly trial balloon, even when splitting expenses with a current casino licensee.