NYS reaches $32M in settlements with online fantasy sports gaming sites
The New York state Capitol in Albany. Credit: Pool/AFP via Getty Images/Hans Pennink
ALBANY — The state Gaming Commission has meted out some of its biggest civil penalties ever against two operators in the increasingly popular field of online fantasy sports gaming.
The two settlements effective this year total more than $32 million. The $17.5 million to be paid by one of them, Underdog Sports of Brooklyn, under a settlement dated March 14 is the commission’s largest civil penalty ever, said Gaming Commission spokesman Lee Park.
The companies had been accused of failing to obtain temporary permits to operate in New York State. A third company was accused of failing to obtain a temporary permit that covers all the games it offered, but settled its case in 2023.
The companies had argued that they believed they had the needed permits for all its games and blamed the state’s system for the confusion.
Similar concerns about the state’s fantasy sports gaming law and regulation are shared by a national trade group and legislators. The lawmakers support a new bill to clarify what is needed to "keep up with the pace of the market and consumer demand" with "a robust licensing and regulatory structure."
"There has been a problem in New York and it’s an ongoing issue," said Peter Schoenke, a board member of the Fantasy Sports & Gaming Association based in Madison, Wisconsin.
He said the state, in part because of delays from court challenges, has limited the sites on which New Yorkers could play and kept some small, innovative companies from entering the market with new offerings.
One thing the commission, operators and legislators agree on is that "interactive sports fantasy gaming" is a growing social pastime for New Yorkers.
The gaming commission’s latest annual report found fantasy sports gaming attracts about $340 million a year in entrance fees by players paid to authorized sites. New Yorkers have more than 33.4 million accounts because players often have several accounts for different teams and leagues. Eight million new accounts were added in 2022 alone.
Here’s how fantasy sports gaming works: Players can pay nothing to enter some online sites that depend on advertising, or pay entrance fees of hundreds of dollars for individuals or thousands of dollars for groups to conduct their own "league."
Gamers choose real-life athletes to form online teams in professional football, basketball and other sports, often at "draft parties." When the athletes in real games score or attain other achievements, the online player who has the athlete on his or her roster wins points.
The difference is that winning in fantasy sports gaming can’t be based on a pro team winning or losing.
Prizes include cash, sports memorabilia and trophies.
The games generate about $5.4 million a year in taxes to the state, including 15% of gross fees from players and a $50,000 annual registration fee charged to companies.
Currently, 10 fantasy sports companies have been authorized to operate in New York on temporary permits for as long as a decade while under review for permanent permits, state records show. New Yorkers are restricted from joining some of the most popular sites nationwide that aren’t authorized by the state.
In the Underdog Sports’ settlement, the company was accused of operating without a state permit, but had argued it purchased another operator that had a permit and that should be have sufficed. The commission didn’t agree.
Two other companies were also assessed penalties.
PrizePicks of Atlanta agreed to pay $14.9 million based on revenue between June 2019 through December 2023, according to its Feb. 14 settlement. PrizePicks said it believed it was operating in New York "in a good-faith belief that it had the ability to do so." But the commission determined PrizePicks didn’t have the required temporary permit.
A third fantasy sports operator, Fanamana, agreed to pay $25,000 in 2021. The company was accused of operating a game not authorized under its temporary permit, according to the commission’s settlement.
"We encourage fantasy sports players to play only through permitted or registered operators that are subject to our comprehensive regulations that protect New Yorkers," said state gaming Commissioner Brian O’Dwyer in a written statement.
The Underdog argument reflects the concern by some other operators that New York’s enforcement system is confusing.
"It’s a unique, temporary license issue specific only to New York," said Nicholas Green, Underdog’s general counsel, in a written statement. He said the commission’s interpretation of state law kept the company from deciding what games it could offer.
"For nearly a decade, fantasy sports in New York has operated in regulatory uncertainty, including licensing delays limiting consumers’ choices to only a couple of legacy operators," Green stated. "We disagree with the commission, but the settlement does provide clarity on New York licensing issues."
PrizePicks’ spokeswoman Elisa Richardson had no comment on the state’s system. She said PrizePicks is working to obtain a state permit.
A legislative proposal with powerful sponsors seeks to increase the number of online fantasy sports games offered in New York and foster more competition.
The bill would seek to clarify regulations, while also increasing tax revenues. The measure would allow more interactive sports operators to do business in New York State, such as the popular ESPN Fantasy and NFL Fantasy sites.
Currently, the field authorized in New York state is dominated by DraftKings and FanDuel, which are major lobbyists in Albany.
"Since then, the market has evolved to include new types of offerings and demand for these types of games has increased rapidly," said the bill sponsored by Sen. Joe Addabbo (D-Queens), chairman of the Senate Racing, Wagering and Gaming Committee, and Assemb. Carrie Woerner (D-Round Lake), chairwoman of the Assembly Racing and Wagering Committee.
The bill said it would raise the minimum age to play to 21 years old because that’s the same age requirement for mobile sports betting.
The fantasy sports association opposes that provision. A trade group survey found that 48% of players are 18 to 34 years old.
"When you’re 18, you’re an adult," Schoenke said in an interview. "You can vote and go into the military ... and 21 is tied to gambling and this is not gambling."
ALBANY — The state Gaming Commission has meted out some of its biggest civil penalties ever against two operators in the increasingly popular field of online fantasy sports gaming.
The two settlements effective this year total more than $32 million. The $17.5 million to be paid by one of them, Underdog Sports of Brooklyn, under a settlement dated March 14 is the commission’s largest civil penalty ever, said Gaming Commission spokesman Lee Park.
The companies had been accused of failing to obtain temporary permits to operate in New York State. A third company was accused of failing to obtain a temporary permit that covers all the games it offered, but settled its case in 2023.
The companies had argued that they believed they had the needed permits for all its games and blamed the state’s system for the confusion.
WHAT NEWSDAY FOUND
- The state Gaming Commission has meted out some of its biggest civil penalties ever against two online fantasy sports gaming operators.
- The two settlements effective this year total more than $32 million.
- The companies argued that they believed they had the needed permits for games and blamed the state’s system for the confusion.
Similar concerns about the state’s fantasy sports gaming law and regulation are shared by a national trade group and legislators. The lawmakers support a new bill to clarify what is needed to "keep up with the pace of the market and consumer demand" with "a robust licensing and regulatory structure."
"There has been a problem in New York and it’s an ongoing issue," said Peter Schoenke, a board member of the Fantasy Sports & Gaming Association based in Madison, Wisconsin.
He said the state, in part because of delays from court challenges, has limited the sites on which New Yorkers could play and kept some small, innovative companies from entering the market with new offerings.
One thing the commission, operators and legislators agree on is that "interactive sports fantasy gaming" is a growing social pastime for New Yorkers.
The gaming commission’s latest annual report found fantasy sports gaming attracts about $340 million a year in entrance fees by players paid to authorized sites. New Yorkers have more than 33.4 million accounts because players often have several accounts for different teams and leagues. Eight million new accounts were added in 2022 alone.
Here’s how fantasy sports gaming works: Players can pay nothing to enter some online sites that depend on advertising, or pay entrance fees of hundreds of dollars for individuals or thousands of dollars for groups to conduct their own "league."
Gamers choose real-life athletes to form online teams in professional football, basketball and other sports, often at "draft parties." When the athletes in real games score or attain other achievements, the online player who has the athlete on his or her roster wins points.
The difference is that winning in fantasy sports gaming can’t be based on a pro team winning or losing.
Prizes include cash, sports memorabilia and trophies.
The games generate about $5.4 million a year in taxes to the state, including 15% of gross fees from players and a $50,000 annual registration fee charged to companies.
Currently, 10 fantasy sports companies have been authorized to operate in New York on temporary permits for as long as a decade while under review for permanent permits, state records show. New Yorkers are restricted from joining some of the most popular sites nationwide that aren’t authorized by the state.
In the Underdog Sports’ settlement, the company was accused of operating without a state permit, but had argued it purchased another operator that had a permit and that should be have sufficed. The commission didn’t agree.
Two other companies were also assessed penalties.
PrizePicks of Atlanta agreed to pay $14.9 million based on revenue between June 2019 through December 2023, according to its Feb. 14 settlement. PrizePicks said it believed it was operating in New York "in a good-faith belief that it had the ability to do so." But the commission determined PrizePicks didn’t have the required temporary permit.
A third fantasy sports operator, Fanamana, agreed to pay $25,000 in 2021. The company was accused of operating a game not authorized under its temporary permit, according to the commission’s settlement.
"We encourage fantasy sports players to play only through permitted or registered operators that are subject to our comprehensive regulations that protect New Yorkers," said state gaming Commissioner Brian O’Dwyer in a written statement.
The Underdog argument reflects the concern by some other operators that New York’s enforcement system is confusing.
"It’s a unique, temporary license issue specific only to New York," said Nicholas Green, Underdog’s general counsel, in a written statement. He said the commission’s interpretation of state law kept the company from deciding what games it could offer.
"For nearly a decade, fantasy sports in New York has operated in regulatory uncertainty, including licensing delays limiting consumers’ choices to only a couple of legacy operators," Green stated. "We disagree with the commission, but the settlement does provide clarity on New York licensing issues."
PrizePicks’ spokeswoman Elisa Richardson had no comment on the state’s system. She said PrizePicks is working to obtain a state permit.
A legislative proposal with powerful sponsors seeks to increase the number of online fantasy sports games offered in New York and foster more competition.
The bill would seek to clarify regulations, while also increasing tax revenues. The measure would allow more interactive sports operators to do business in New York State, such as the popular ESPN Fantasy and NFL Fantasy sites.
Currently, the field authorized in New York state is dominated by DraftKings and FanDuel, which are major lobbyists in Albany.
"Since then, the market has evolved to include new types of offerings and demand for these types of games has increased rapidly," said the bill sponsored by Sen. Joe Addabbo (D-Queens), chairman of the Senate Racing, Wagering and Gaming Committee, and Assemb. Carrie Woerner (D-Round Lake), chairwoman of the Assembly Racing and Wagering Committee.
The bill said it would raise the minimum age to play to 21 years old because that’s the same age requirement for mobile sports betting.
The fantasy sports association opposes that provision. A trade group survey found that 48% of players are 18 to 34 years old.
"When you’re 18, you’re an adult," Schoenke said in an interview. "You can vote and go into the military ... and 21 is tied to gambling and this is not gambling."
Michael Gormley has worked for Newsday since 2013, covering state government, politics and issues. He has covered Albany since 2001.
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