Delaware reinstates fantasy sports, with a tax on operators

Gov. John Carney, D-Delaware, signed legislation Wednesday that allows Delawareans to bet on fantasy sports, and directs the state to create regulations for the industry.

The legislation, sponsored by State Rep. Charles Potter, D-Wilmington, labels fantasy sports “games of skill,” asserting it is not a form of illegal gambling under Delaware law.

“It’s not often I get to sign fun bills, and I suspect this is a fun bill to sign,” Carney said.

Last year, the Delaware Department of Justice notified several leading fantasy sports operators that “their respective online fantasy sports activities are not permitted under Delaware law.”

The decision followed moves from other states that declared fantasy sports a gambling activity, and that operators must have a gambling license.

Popular online fantasy sports operators have argued the activity is not gambling because it’s a “game of skill,” while others have argued it’s a “game of chance,” and therefore gambling.  

Delaware is the 13th state to pass a law allowing fantasy sports to operate as “games of skill.”

Delaware’s fees on fantasy sports operators will be one of the highest in the nation.

In addition to applying for a license, operators of paid fantasy sports are subject to a 15 percent fee on their net adjusted revenues, or the equivalent of the highest rate set by another state, as well as a $50,000 annual fee. Delaware would always have a fee equivalent to the highest rate in the country, which is currently in New York.  

The fees would be based on the proceeds after cash awards are handed out.  

In June, Potter’s bill failed in the Senate with a 10-11 vote. However, it was brought back for reconsideration during the last day of session, earning a 13-7 vote in the Senate and a 36-4 vote in the House.

Potter also attempted to pass similar legislation last year, but the bill never made the House floor.

Potter and other supporters say the new law will protect customers and ensure games are organized ethically. They also say it will bring in significant revenue to the state—an estimated 150,000 Delawareans play fantasy sports, and there would be an estimated $500,000 to $1 million during the first year of legalization.

“It gives [Delawareans] something extra they like to do, people like to dream and put teams together, people can have fun, and the good thing about is they know we’re going to have fun and the state is going to make money, which we hope will help some nonprofits, some seniors, and other people in the state of Delaware,” Potter said.

Cory Fox, council for policy and government affairs at FanDuel, a fantasy sports operator, said the fantasy sports industry looks forward to operating in Delaware.

“We’re excited to open back up to the state of Delaware and offer our contests here,” he said. “We know there are a lot of people here in Delaware who love to play fantasy sports and we’re excited to serve them.”