VA Bill Legalizing Sports Gambling May Kill Industry With High Fees

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Steve Birr Vice Reporter
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Legislation aimed at legalizing fantasy sports gambling in Virginia may end up gutting the industry with crippling, unaffordable fees on businesses.

Virginia Gov. Terry McAuliffe signed a bill in March authorizing fantasy betting, however, it requires businesses annually register with the state to the tune of $50,000. The largest fantasy gambling businesses, like FanDuel and DraftKings, can withstand such costs, but smaller outfits looking to compete in the blossoming industry will be edged out by the onerous expense, reports NBC Washington.

Indiana recently passed similar legislation, however, the state only requires a one-time $50,000 fee, with an annual fee of $5,000. Other states are considering proposals along the same lines, but New York is the most hostile to fantasy businesses, considering a $500,000 registration fee.

Previously, the attorney generals of New York and Texas ruled businesses like DraftKings facilitate illegal gambling. FanDuel agreed to cease operations in both states until a legal framework is created. While FanDuel and DraftKings advocate for low cost fees industry wide, they have not actively worked with state legislators to prevent high fees, reports Fox 59.

Many states across the country are reviewing legislation regulating the sports gambling industry, but Virginia and Indiana are the first to implement laws officially legalizing the practice.

“On one level, it’s ‘rah-rah, yes, let’s do this,'” Rishi Nangia, co-founder of fantasy sports startup Syde in Arlington, Va., told NBC Washington. “But we know now that these companies are fighting for their bottom line.”

Small business owners and startup entrepreneurs like Nangia say the bill formally legalizing their businesses will likely put them out of business. When the law takes effect July 1, many Virginia business owners say they will be forced to close their doors.

“Given the cost constraints of our hobbyist business model, any requirement that we each pay a $50,000 licensing fee to the state of Virginia would lead us each to exit the Virginia marketplace – thus depriving hundreds of thousands of Virginia sports fans of access to play in their favorite traditional fantasy sports games,” read a letter from a group of fantasy sports website owners to McAuliffe.

The bill threatens to create a market environment dominated by DraftKings and FanDuel, where smaller websites get crushed under the weight of registration fees. The two companies say they fight for the smaller folks in their industry, but experts disagree.

“I can’t tell you that FanDuel and DraftKings wanted this type of situation,” Darren Heitner, a Florida lawyer who represents small fantasy sports outfits told the Associated Press. “But they’re not displeased with them.”

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