Playing daily fantasy sports in California

Strictly speaking, daily fantasy sports (DFS) is not legal in the state of California. That is to say, there is no law explicitly making it legal.

California lawmakers began considering daily fantasy sports legislation in 2015. In fact, the California Assembly passed a bill seeking to legalize, regulate and tax DFS in January 2016. However, the Senate has not acted on the bill in the 18 months since it passed through the Assembly.

This doesn’t mean there is no DFS in the state though. In actuality, major DFS operators, including FanDuel and DraftKings, still accept players. The sites do not believe DFS constitutes illegal gambling.

Instead, DFS operators consider it a skill game. As a result, the sites believe a clause in the 2016 Unlawful Internet Gambling Enforcement Act allowing real-money fantasy sports supports this theory.

Ultimately, these sites believe DFS is legal in California in the absence of a law making it illegal.

California daily fantasy sports regulation

There is no legal framework, fees, or taxes associated with DFS operations in California.

The California Assembly passed a bill seeking to legalize, regulate, and tax DFS by a 62-1 margin in January 2016. However, it stalled at the Senate level. The California Assembly was actually the first legislative body in the United States to approve a bill regulating DFS.

The bill was a little light on specifics. However, it clearly sought to establish a licensing process for DFS operators in California. If the bill became law, operators would pay a licensing fee and a quarterly tax based on gross income. However, the bill  the Assembly passed did not specify what exactly the fee or tax rate would be. The Assembly expected the Senate to weigh in on these specific details and amend the bill to include them before voting on it.

The bill also included language surrounding a self-exclusion program for problem players and requirements that sites differentiate between DFS players and beginners. It also imposed a minimum player age of 21.

California 21st District Assemblymember Adam Gray introduced the bill. He maintained it aimed at protect the hundreds of thousands of Californians already playing DFS. These players continue to play in the unregulated market in California.

What California’s Attorney General says about daily fantasy sports

In 2015, Assemblymember Marc Levine asked then-California Attorney General Kamala Harris to examine the legality of DFS in the state. More specifically, Levine wrote a letter to the AG’s office asking Harris to clarify that DFS is illegal. Then, Levine hoped he would order FanDuel, DraftKings and other fantasy sports betting websites to immediately discontinue business in the state.

At the time, several media outlets reported that Harris declined to comment on the letter, citing potential interference with a pending DFS investigation. It was also widely reported that Harris would not confirm nor deny the state, or her office, were investigating DFS operations in the state.

Nothing ever came of this. Harris never commented on DFS again. In November 2016, Harris was elected to serve in the United States Senate. Xavier Becerra took over as Attorney General of California in January 2016. Governor Jerry Brown appointed him to the post. Becerra has not made any public statements regarding DFS in California.

The biggest daily fantasy sports sites in California

Of course, FanDuel and DraftKings are the two most popular DFS operators in California. In fact, FanDuel and DraftKings have reportedly cornered more than 90 percent of the DFS market across the United States.

In November 2016, the two companies entered into a merger agreement. The two groups should complete the deal sometime in the second half of 2017. The lengthy merger process is due to a number of closing conditions, logistical issues, and a review of anti-trust concerns.

The Federal Trade Commission is conducting an anti-trust review to determine if the merged company would constitute a monopoly. The companies reported in May 2017 it was going well.

Questions still remain as to how the company will function as a single entity forward, as well as if it will remain two DFS platforms or one.

How popular is daily fantasy sports in California?

As the most populous state in America and a known hotbed for professional sports, California represents the largest market for DFS.

Estimates suggest DFS sites are pulling in as much as $20 million in revenue annually from California players. In fact, the state is responsible for more than 10 percent of all DFS contest entries in the United States.

It is estimated California has almost 120,000 active DFS players, the most of any state. Plus, those players are responsible for more than $200 million in annual entry fees, the most of any state by a rather large margin.