The state is moving toward making daily fantasy sports games legal and regulated under state law, which could put New Jersey on the ground floor of this emerging multibillion-dollar industry.
There are also signs that the establishment of daily fantasy might weaken opposition to legal and regulated sports betting in general. That could help New Jersey attain its long-sought goal of joining the existing four states allowed by the federal government to offer sports betting.
Daily fantasy grew from seasonlong sports fantasy leagues, in which participants assemble teams based on real-life athletes. If the athletes play well on their own teams, they help their fantasy teams as well.
Daily fantasy players can compete over shorter terms (against each other or benchmarks) and get results in days or even hours. Participants pay fees to play and can win large money prizes. The games are legal under federal law, the result of a fantasy sports exemption from a federal law banning online gaming. They generated more than $3 billion in entry fees last year.
N.J. legislation allowing and regulating daily fantasy, sponsored by Sen. Jim Whelan and fellow Atlantic County Democrat Assemblyman Vincent Mazzeo, was approved by a Senate committee this month and sent to the full Senate. Amendments since its debut last year have resulted in a bill with good protections for the public that also should work for daily fantasy companies and casinos.
For example, people would be able to exclude themselves from daily fantasy play, and those on the existing self-exclusion list for casinos would already be banned.
The bill would allow casinos to offer daily fantasy on their own or in partnership with other providers. It would also require that a licensed provider locate at least one of its computer servers for the game within Atlantic City by the end of 2017.
Daily fantasy operations would pay the state 9.25 percent of entry-fee revenue from New Jersey players, the same percentage that casinos pay in tax on gambling revenue.
A prohibition against daily fantasy firm employees playing for themselves - even at other companies - has been retained, the result of a case in which such an employee won $350,000 playing through a rival firm.
The two largest providers, DraftKings and FanDuel, support that ban, but continue to oppose the N.J. legislation because it doesn't specifically exclude daily fantasy operators from casino gaming regulations. The bill does describe daily fantasy as a competition "for a predetermined prize with the outcome reflecting the relative skill of the participants."
Declaring the games to be skill-based was part of the law in Virginia, which in March became the first state to authorize daily fantasy (effective July 1). Indiana and Tennessee soon followed.
With its existing casino industry and growing online gambling segment, New Jersey seems to have some natural advantages to hosting daily fantasy as well. We hope the bill clears the Legislature and is signed into law soon.
A U.S. House subcommittee hearing last month suggests the establishment of regulated daily fantasy might favor New Jersey's effort to let it join Nevada, Delaware, Montana and Oregon in offering sports betting. Legislation introduced by two N.J. congressmen, Reps. Frank LoBiondo, R-2nd, and Frank Pallone Jr., D-6th, would allow that.
At the hearing, the American Gaming Association called for "a fresh look," saying "the status quo on sports betting is unsustainable." An MGM executive noted that sports leagues have opposed sports betting even though some of them have embraced daily fantasy games.
Fairness and equitable treatment of the states regarding sports betting may yet prevail.