Tarnished Twenty- The FindLaw Sports Law Blog

Virginia Legalizes, Regulates Daily Fantasy Sites

Virginia will become the first state to legalize and regulate online fantasy sports this summer. This week, Governor Terry McAuliffe signed the Fantasy Contests Act, which requires daily fantasy sites like DraftKings and FanDuel to register and submit annual audits to the state.

While other states have been lining up to designate daily fantasy sites as illegal gambling operations, Virginia seems to be moving in the opposite direction, perhaps looking to cash in on daily fantasy rather than outlaw it.

Playing By the Rules

Virginia's online fantasy regulations, which go into effect July 1, are fairly stringent, and may exclude smaller sites from entering the market. Under the law:

  • Fantasy sites must ensure all participants are over the age of 18;
  • Fantasy site employees (and relatives living in the same house) are barred from participation;
  • Sites may not share "confidential information that could affect fantasy contest play with third parties until the information is made publicly available"; and
  • Daily fantasy operators must keep player funds and operations funds completely separate.

Online fantasy platforms are required to pay a $50,000 licensing fee and must submit to biannual audits from the Virginia Department of Agriculture and Consumer Services.

Swimming Upstream

It's unclear whether Virginia is blazing a new trail forward for daily fantasy sites, or, as some would say, rowing a boat up a waterfall." 11 states, including New York and Texas, have declared daily fantasy sites illegal under state gambling laws. And Nevada has shut down online fantasy sites until they comply with the state's existing gambling regulations.

It's possible that Virginia's fantasy sports law is the model for how to legitimize, regulate, and monetize daily fantasy sites. And it's also possible that it's too little, too late for an industry struggling against governmental oversight. After gaining billions in backing and signing lucrative partnerships with sports leagues and television networks, DraftKings and FanDuel have come under increasing media scrutiny and been the subject of numerous fraud lawsuits.

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