Virginia Monday signed into law the "Fantasy Contests Act," a bill outlining how daily fantasy sport sites like DraftKings and FanDuel can operate legally in the state. The law is the nation's first formal recognition of the industry after months of heated legal activity in multiple states.
Regulators and lawmakers around the country have sought bans on the websites on the grounds they constitute illegal online gambling. The Virginia legislature first approved the new bill in February. Governor Terry McAuliffe signed it Monday, putting the state's Department of Agriculture and Consumer Service in charge of overseeing the industry.
Alongside undergoing two independent audits every year, fantasy sport sites must pay a $50,000 fee to operate in Virginia, impose policies to ensure all players are 18 years or older, and ban employees of fantasy sites from participating in public contests, among other consumer protection measures.
While DraftKings and FanDuel are still tied up with the biggest and most threatening legal challenge in New York, the Virginia law acknowledges the activity as a game of skill. The distinction is crucial, as DraftKings and FanDuel have used the classification as a loophole to avoid the federal ban on online gambling enacted back in 2006.
DraftKings is pleased with the news. "Today, Virginia became the first state in the nation this year to put in place a thoughtful and appropriate regulatory framework to protect the rights of fantasy players," the company said in a statement. "We thank Governor McAuliffe for his leadership and advocacy and are hopeful that other states across the country will follow Virginia's lead. We will continue to work actively to replicate this success with dozens of legislatures and are excited to continue these efforts."
"Governor McAuliffe and members of the Virginia legislature took a thoughtful, deliberative approach to establishing a law that safeguards fantasy sports while installing consumer protections," said Cory Fox, a lawyer for FanDuel, in a statement. "Virginia showed real leadership in being the first state to pass smart regulations this year and we hope to see more states follow Virginia's lead in the months ahead."
While the law appears to appease the industry's largest players, it does not differentiate between daily fantasy sports and the more traditional season-long version of the game. Daily fantasy sports is a hyper-accelerated form of sports wagering that compresses seasons into a single day and lets players wager thousands of dollars on those outcomes, which is precisely why it's compared with outlawed gambling contests like online poker. Season-long fantasy sports, however, is the kind of game friends may play over the course of many months using a service like Yahoo Sports. Smaller season-long companies, which still allow players to win large sums of money, say the new law's $50,000 fee is prohibitive, according to The Virginia Pilot, and may push them out of the state entirely.