New Jersey Looks to Increase Rake on DFS Operators
The New Jersey Division of Consumer Affairs on Friday issued a press release announcing new proposed regulations that would impose permit fees and other requirements on daily fantasy sports operators.
The biggest potential rule change concerns the cost of an annual permit fee that each operator would have to pay the division — a fee scaled to the operators’ gross revenue from DFS contests.
Although DFS operators entered the Garden State earlier, former Governor Chris Christie signed a bill legalizing DFS in July 2017, becoming the 16th state to do so. The law currently requires that applicants pay a permit fee, but does not specify any amount, only “an amount sufficient to cover the division’s cost in issuing fantasy sports permits and overseeing the conduct of such activities.”
How much are DFS operators potentially looking at?
1. Application fee — $500.00
2. Permit fee:
(a) For DFS with gross revenue up to $ 49,999 — $5,000
(b) For DFS with gross revenue from $50,000 to $99,000 — $10,000
© For DFS with gross revenue from $100,000 to 250,000 — $20,000
(d) For DFS with gross revenue over $250,000 — $50,000
Realistically, this is a DraftKings and FanDuel tax, as both companies are dominating the rapidly growing New Jersey sports betting market. In October, DraftKings online sportsbook generated $5.1 million revenue and FanDuel $2.43 million — actually a dip from September’s $8.5M and $2.85M hauls, respectively.
DFS revenue doesn’t touch those figures, but both DraftKings and FanDuel both will surpass those $250,000 and up tiers in a single month.
Most importantly, will this change anything for the DFS player? Almost certainly not. It would be an unwelcome new fee but overall, shouldn’t impact tournament payouts or anything of the kind. At the moment, both DFS leaders are giddy over their new sports betting revenue streams as they make entry into new states such as Mississippi and perhaps next year, into New York.
Will it discourage new DFS operators from coming to New Jersey or from staying? Smaller players like FastPick, Boom Fantasy or PrizePicks, which does not yet operate in New Jersey? We don’t think it will impact their decision-making, either.
“I truly believe tiered fees are the most fair regulatory framework for fantasy sports,” RotoGrinders’ Dan Back told NJ Online Gambling. “In my mind, it doesn’t make a lot of sense for start-ups and smaller operators to pay the same amount as FanDuel and DraftKings. We are starting to see a few new innovative fantasy products hit the DFS landscape the past 12 months, so it’s always good to have regulatory structures that allow them to come to market in as many states as possible.”
The existing tax obligation owed by operators to New Jersey is 10.5 percent of gross revenue.
According to the division, “interested persons may submit comments, information or arguments concerning any of the rule proposals in this issue” via snail mail or electronically here. You must submit your comment before Jan. 18, 2019.