N.Y. State Assembly Photo

NY Daily Fantasy Law Targets Contest Sites

New law on daily fantasy sports contests in New York addresses horse racing.

A legislator who co-sponsored recently adopted legislation on daily fantasy sports said a line included in the new law aims to prohibit unlicensed horse racing contests that do not support the racing industry.

New York Assemblyman Gary Pretlow said a line in the legislation signed by the governor Aug. 3 that prohibits daily fantasy sports contests using college or high school athletes, or on horse racing, targets horse racing contest sites that do not support racing. 

"Sites like DerbyWars.com offer fantasy racing and the horsemen have an issue with those sites, because they're taking their product and making money on it," Pretlow said. "Nothing goes back to the owners, breeders, jockeys, tracks—nobody. So I thought, 'Let's knock them out.'"

Racing's foundation revenue generator is pari-mutuel wagering, which sees a percentage of its takeout from each pool committed to purses, racetracks, and regulation of the sport. Pretlow said some contest sites commit none of their profits to the sport but use race outcomes to determine winners. He said because pari-mutuel wagering is so important to racing's business model, the sport needed specific protection from daily fantasy sites.

"It was just something I thought would take away from an existing form of wagering, which is the pari-mutuel," said Pretlow, noting that the NFL doesn't generate revenue from gambling on the sport, so allowing daily fantasy using NFL players doesn't threaten that sport's business model. "I could see a horseplayer going to a fantasy site and playing there because they're real horses, real jockeys, real tracks, and doing whatever handicapping they're going to do there. It would take away from the pari-mutuel handle."

While representatives from horse racing contest sites DerbyWars.com and HorseTourneys.com declined comment on the new legislation, they have previously argued that their contests are not daily fantasy competitions.

The sites have some industry acceptance. DerbyWars has reached agreements with some tracks to operate contests and HorseTourneys offers tournaments that award seats to industry-recognized events like the DRF/NTRA National Handicapping Championship.

NTRA chief operating officer Keith Chamblin said sites that offer NHC qualifiers are required conduct contests in accordance with state and federal laws.

"National Handicapping Championship online qualifiers are not operated by the NTRA. However, we do require that all NHC qualifiers be conducted in accordance with all state and federal laws," Chamblin said. "How the New York daily fantasy sports law will impact online horse racing contests remains to be seen. Each contest operator must make that determination for itself."

New York Racing Association communications director Pat McKenna thought it was too early to address how the new law will play out in terms of online contests, but did note that contests conducted at NYRA tracks are legal because they are not daily fantasy contests. 

New York state law already has a specific classification in place for these contests. That law allows racing associations and regional off-track betting corporations to operate handicapping tournaments, in which participants are charged an entry fee. The rule requires all entry fee money to be paid back to tournament winners.

The rule requires approval of contests and payout structure by the New York State Gaming Commission. It also requires the tournament operator be authorized to conduct pari-mutuel wagering on the races being used in the contest and at least half the contest races have to be conducted in New York.

The rule says if a contest meets all of those standards, it will be considered a contest of skill and not be considered gambling.

As legislators and district attorneys have brought more scrutiny to daily fantasy sites in recent months, horse racing contest sites have argued that they are not daily fantasy. In New York there may be less cover for such an argument, because if the sites contend that they are operating as horse racing contests, the state's requirement that all entry fee money be paid out to participants would prevent the sites from making any profit. The sites typically withhold a percentage of the money paid in by players.

The requirement that the contest host offer pari-mutuel wagering on the contest races also would be a problem for some of some contest sites, if they seek legal cover on New York's rule on horse racing contests.