Group urging Nixon to veto fantasy sports measure
The following article can be found in its original form at this link from the St. Louis Post-Dispatch:
St. Louis Post-Dispatch: Kurt Erickson, May 17, 2016
JEFFERSON CITY • A proposal to regulate and tax fantasy sports in Missouri is under attack by smaller companies who say it favors the two behemoths of the industry: FanDuel and DraftKings.
Before ending the 2016 legislative session on Friday, Missouri lawmakers sent Gov. Jay Nixon a proposed framework for allowing fantasy companies to operate legally in the state.
Under the plan, fantasy sports websites would pay an annual registration fee of $10,000 or 10 percent of entry fees, as well as an annual administration fee of 11.5 percent of revenue. It limits daily fantasy sports to those at least 18 years old and would give the state Gaming Commission oversight.
But Alex Kaganovsky, co-founder of the Small Businesses of Fantasy Sports Trade Association, said the proposed law would decimate dozens of smaller fantasy sports businesses.
“We appreciate that the Legislature wants to address this issue, but this bill will kill us,” Kaganovsky said.
He said the legislation didn’t take into account the difference between players who participate in daily fantasy games offered by DraftKings and FanDuel and those who play in season-long leagues.
The smaller companies typically cater to players who compete with friends for an entire football or baseball season.
“We’re talking about several hundred mom-and-pop businesses that serve several thousand players each, not millions of players like the gigantic companies. Season-long fantasy sports is a hobby. The taxes and fees proposed in Missouri are unbearable,” Kaganovsky said.
Regulating fantasy sports has been a hot-button topic in state legislatures across the nation. Some states have deemed the games gambling and have sought to shut down the operations.
Indiana, Virginia and Tennessee are among states that have approved daily fantasy sports laws this year.
In his State of the State address in January, Nixon, a Democrat, called on lawmakers to send him legislation that would regulate and tax the industry, with the proceeds going toward schools.
The measure moved through the Senate on a 20-10 vote. The “no” votes were all Republicans.
Sen. Eric Schmitt, R-Glendale, said he opposed the measure because of the additional rules that companies would have to follow.
“I just think this is a bit of an overreach at this point,” Schmitt said. “It’s a pretty burdensome series of regulations that we’re about to impose on an industry that’s catering to a particular market.”
The measure, sponsored by Sen. Joe Keaveny, D-St. Louis, moved quickly through the House last Thursday, winning approval on a 130-13 vote.
Keaveny said the plan could generate as much as $10 million for the state, but industry analysts suggest that may be inflated.
An earlier version of the measure would have generated about $100,000 annually, according to a legislative analysis. But that money would have gone toward setting up a regulatory structure, leaving the state with no additional revenue.
During negotiations with lawmakers, Nixon’s office had reportedly sought a 21 percent tax on the operators. That amount was halved by the time a final version was put before the full House and Senate.
“Ninety-five percent of the industry is mom-and-pop shops,” Kaganovsky said. “Our small businesses only make a small fraction of the billions of dollars that FanDuel and DraftKings make, but that doesn’t mean that we should be squeezed out of existence.”
Another organization representing companies, the Fantasy Sports Trade Association, issued a statement expressing concern about the tax rate.
“The high tax rate will create challenges for small operators,” the statement noted.
Although Nixon called for a regulatory and tax scheme and his aides had a hand in negotiations, his office wouldn’t say Monday whether he would sign it.
“Every bill that comes to his desk is going to get his full review,” spokesman Scott Holste said.
The legislation is House Bill 1941.