Fantasy sports-related news, advertisements and state attorneys general opinions have been dominated by DraftKings and FanDuel over the past year. The companies have also led the recent charge in states changing their laws to expressly permit entry fee fantasy sports offerings within their borders. Yet, many smaller fantasy sports sites have felt ignored in the process, which may have a silver lining in that they have largely avoided scrutiny from state attorneys general.
In March 2016, Virginia became the first state to specifically authorize fantasy sports operations that provide entry fee-based contests. Virginia was followed by Indiana. A major gripe of fantasy sports sites not named DraftKings or FanDuel is the $50,000 licensing fee attached to being deemed legal in either state. With many other states considering the express legalization of fantasy sports, smaller sites have stepped up to find their voice.
A coalition called the Small Businesses of Fantasy Sports Trade Association (SBFSTA) has been formed to protect those smaller fantasy sports operators concerned that the door will be shut on them by states like Virginia and Indiana through the imposition of large licensing fees. The SBFSTA understands that DraftKings and FanDuel have the funding and user bases to attract attention, but note that smaller sites conduct business across the U.S. and should not be shut out at the expense of the large players angling for a duopoly.
Is there a need for more than one association for the fantasy sports industry?
"The founding members of the SBFSTA were initially under the impression that there was no need for another association besides the FSTA, until we realized that the legislation that the FSTA was putting forward favored FanDuel and DraftKings instead of the vast majority of its small business game operator members," said Alex Kaganovsky, founding partner of Fantasy Football Players Championship and co-founder of the SBFSTA. "We felt that a stronger voice was needed to speak on behalf of the small business owners of fantasy sports."
The Fantasy Sports Trade Association (FSTA) referenced by Kaganovsky, is the leading advocate for the fantasy sports industry. Its membership is comprised of over 300 member companies and the FSTA has been credited for coordinating a lobbying effort, with DraftKings and FanDuel, by enlisting dozens of lobbyists in 34 states.
It is the close coordination between FSTA, DraftKings and FanDuel that has Kaganovsky and other small site operators concerned.
What about the FSTA distancing itself from DraftKings and FanDuel?
Earlier this month, the FSTA sent a letter indicating that 1 of its 3 core principles is to ensure that fee structures implemented by states continue to allow small operators to remain viable. The FSTA committed to working toward amending bills when that element is not present in legislation.
The FSTA also addressed its more-than-tight relationship with FanDuel and DraftKings.
"Last fall, the FSTA engaged in a partnership with FanDuel and DraftKings for grassroots advocacy efforts through the Fantasy Sports For All platform. While the FSTA remains aligned with FanDuel and DraftKings on the majority of its advocacy efforts, our commitment to our members no longer allows us to continue in this partnership," stated the letter.
Kaganovsky is not encouraged by the FSTA distancing itself from the Fantasy Sports For All platform and indicates that he does not know the internal struggle that forced the FSTA to make the aforesaid decision.
"What we do know is that the FSTA initially represented the Fantasy Sports For All website as a grassroots effort by the entire fantasy industry to help raise awareness and mobilize fantasy players to contact their state representatives and ask them to pass good fantasy sports legislation to legalize fantasy sports," said Kaganovsky. "However, we recently found out that the Fantasy Sports For All website was actually created and run by Orrick, the head lobbying firm for FanDuel and DraftKings. So when the Fantasy Sports For All followers were asked to support fantasy bills which only allowed FanDuel and DraftKings to exist and put everyone else out of business, the pressure on the FSTA became too great and they could no longer publicly support the Fantasy Sports For All website. From the start, the FSTA should not have allowed this situation to develop."
What has the SBFSTA accomplished to date?
As of today, the SBFSTA lists 26 player members and 47 business members. It is a far cry from the hundreds represented by the FSTA, but it is certainly a strong start for an association that was only recently formed.
"We have had very productive meetings in Albany with New York Assemblyman Pretlow and also with New York Senator Bonacic's staff," explained Kaganovsky. "Mr. Pretlow spoke at the iGaming convention recently and said his bill would contain small-business friendly language. Senator Bonacic's senior staff member also assured us of the same."
Kaganovsky has spent the last 2 weeks in Springfield, Illinois working with State Representative Michael J. Zalewski on HB4323, which just passed through committee. He and his colleagues have additionally been speaking with and hope to be meeting lawmakers in Pennsylvania, Massachusetts, Connecticut, New Jersey and other states.
"We have found that most lawmakers have very little understanding of the nuances of this industry," added Kaganovsky. "We want to help them understand and make laws that take all small business's needs into consideration."