Steve Ruddock daily fantasy sports California

California is one of several states where legislators are contemplating legalizing and regulating daily fantasy sports.

To gauge the current temperature for daily fantasy sports regulation in the Golden State, we reached out to a number of entities from gaming operators to regulators and from lawyers to politicians to find out their thoughts on DFS.

Assemblyman Gray’s DFS bill

California Assemblyman Adam Gray started looking at DFS prior to the current to-do that has touched off the current regulatory and legal scrutiny taking place in other statehouses and in Washington D.C. Gray’s bill (AB 1437) would legalize and regulate the DFS industry, and require all operators to be licensed by the state.

In an interview with the Orange County Register, Assemblyman Gray discussed his bill, and why he’s pushing for licensing and regulation of the DFS industry.

“When you have this kind of gaming and this kind of money, there’s a reason we regulate this stuff,” Gray said. “You want to make sure that these games are being conducted fairly and that there are consumer and legal protections and restrictions on age participation for kids. All of those things are very important to have in place.”

Gray indicated that even though they were ahead of the curve, he doesn’t plan on rushing into DFS because of the recent allegations swirling around the industry. “We’re going to go ahead with our informational hearing in December,” Gray told the OC Register, “And then come January, we’ll probably take a good look at trying to move some legislation along.”

Under Gray’s proposed bill, licensing would be handled by the Department of Justice (the California Bureau of Gambling Control) with oversight carried out by the California Gambling Control Commission.

In a statement, the CGCC explained how these duties would be divided under California’s somewhat complex bifurcated regulatory system:

“We are following developments in other jurisdictions like Nevada and we are tracking legislation and regulatory activity all over.

But, as you know California has a split system regarding gambling regulation: Legislature comes up with the laws, governor signs them, Commission issues license and the Bureau of Gambling Control decides what is legal (game-wise) and who is in compliance. The Bureau would also serve as enforcer against illegal activity, should that be determined.”

What the state’s gaming operators think about DFS

A number of people I reached out to simply directed me to the comments made by Assemblyman Adam Gray (see above), who is spearheading the efforts to address daily fantasy sports in the California Legislature. That being said, several gambling stakeholders did comment on potential DFS legalization and regulation.

The general tone from virtually all of the people I spoke with was to take a cautious, wait-and-see approach until the legal and regulatory landscape crystallizes.

Joe Patterson, the Executive Director of the California Gaming Association stated:

“To date, the California Gaming Association (CGA), the statewide trade association that represents the California cardroom industry, has taken no position on regulating the Daily Fantasy Sports industry.  

That said, the CGA routinely supports companies providing products and services that enhance visitor experiences at cardrooms and remains open to complimentary relationships with any industry that appeals to our industry’s constituency and complies with all laws and regulations.”

A spokesperson for the coalition that has partnered with Amaya Gaming and PokerStars for online poker, comprised of the Morongo Band of Mission Indians, the San Manuel Band of Mission Indians, Bicycle Casino, Commerce Casino, and Hawaiian Gardens Casino, said they’re “focused on online poker.” It should be noted that Amaya Gaming owns the DFS site StarsDraft, which pulled out of California and all but four states in the wake of the DraftKings data leak controversy.

Jim Ryan, the CEO of Pala Interactive, indicated his company is paying attention to DFS, but is not pursuing any formal DFS strategy at this time:

“Pala Interactive’s current focus is our existing and prospective real money iGaming operations as well as our growing B2B social gaming offerings. We are watching the DFS developments in California carefully. Given the general regulatory uncertainty on the local and Federal level, we are currently not pursuing a DFS strategy at this time.”

It seems that the current legal and regulatory uncertainty is causing the state’s gaming operators to keep a watchful eye on the DFS industry, but also to keep it at arm’s length.

Legality of daily fantasy sports in California

According to gaming attorney Vincent Oliver, they are wise to do so. In a paper discussing the legality of DFS in California, Oliver notes that California’s laws forbid pool selling, which he feels DFS would fall into based on the language of the statute.

In a letter sent to Assemblyman Gray, the group Stand UP CA raised the same legal concerns as Oliver:

“Without great legal analysis, it is easily determined that DFS is a sports pool or percentage game. The California State Legislature long ago determined that sports pools and percentage games are illegal gambling activities in California.

(See California Penal Code 337(a) (l-6l In addition, because online DFS operators charge bettors a rake that is a percentage of the wager, DFS is an illegal percentage game. (See California Penal Code 330.)”

There is also the potential for a second legal question to arise should the legislature legalize and regulate DFS as if it were gambling. According to Daniel Wallach, this type of regulation could open a state up to a PASPA lawsuit.

Takeaways

California will have to work out a number of issues when it comes to daily fantasy sports. The state needs to explicitly rule on the legality of DFS in California, and then work out a regulatory framework that is not only in compliance with federal laws, but also conducive (nominal licensing and tax burdens) to the success of DFS operators.

If California can clarify the legal and regulatory landscape, the state’s gaming operators may give the industry a harder look, perhaps partnering with existing DFS companies or even launching DFS websites of their own. Sans this clarity, the state’s gaming operators will likely remain on the sidelines.

Steve Ruddock
Steve Ruddock - Steve is one of the most recognizable names in the online poker media space. He brings his deep knowledge and equally deep well of opinions to his coverage at CaliforniaOnlinePoker.com.