New law taxes, regulates fantasy sports in New Jersey

Fantasy sports are now explicitly on the books in New Jersey – and taxed and regulated, under a bill signed Thursday by Gov. Chris Christie.

The law regulates large-scale commercial fantasy sports, in which people pay a fee to manage an imaginary team and compete for predetermined prizes based on athletes’ real-world statistical performance. It doesn’t put limits on smaller season-long fantasy sports among families and friends.

Assemblyman John Burzichelli, D-Gloucester, said fantasy sports has become “a big business,” as evidenced by television ads and apps available through sports leagues themselves, such as the NFL.

“Fantasy sports have become a real point of recreation and interest for New Jersey residents, so establishing a structured environment where a New Jersey resident who is old enough to participate in this can do so in a reputable, safe environment so they have protections I think was a right step,” said Burzichelli.

“There are real consumer protections here,” he said. “Plus, the state’s going to be able to enjoy some revenue from this, which is sorely needed.”

The new law applies a new 10.5 percent quarterly tax on the companies’ fantasy-sports related gross revenues. Fiscal analysts from the Office of Legislative Services project that will yield at least $6.6 million in annual revenues, not counting any penalties for violating regulations.

People under age 18 will be ineligible to participate in fantasy sports. That’s already the age requirement for fantasy-sports providers such as DraftKings and FanDuel.

Companies will need state permits and inspections from the Division of Consumer Affairs in the Department of Law and Public Safety, not the Division of Gaming Enforcement.

Assemblyman Ralph Caputo, D-Essex, said fantasy-sports companies wanted to be regulated to stem criticism they were operating outside the jurisdiction of the law. The law prevents company employees from playing in the games, which he said will help prevent insider trading.

“It’s a win for everybody. It’s a win for the state, and it also protects our consumers. And it also helps the companies because I think they prefer operating legitimately in the state,” Caputo said.

Sponsors said the new law is another step toward legal sports betting. New Jersey has a case that’s currently before the Supreme Court challenging a ban on the further spread of sports betting.

“Well, I think it’s just a lead-in. I think that’s going to be a reality sooner or later,” Caputo said. “Even though there’s a difference of opinion whether this is skill or gaming or whatever, eventually I see sports betting – it’s just hypocritical to say people can do this but not bet on sports.”

“New Jersey residents like to bet on sports – in this case fantasy sports,” Burzichelli said. “The state has a clear right to do that. We’ve just done that by establishing regulations and a structure. And we’re still hopeful that we’re going to win at the Supreme Court, that actual betting on sports, real sports, real-time betting, is going to happen sooner than later.”

Christie signed the bill without comment.

The bill’s primary Senate sponsor was Sen. James Whelan, D-Atlantic, who died unexpectedly of a heart attack Tuesday, after dealing with complications following surgery six weeks ago remove cancerous growths from his kidneys.

“This is really Sen. Whelan’s bill,” Caputo said. “To add to his legacy, I’m very happy that the governor signed the bill. Very timely.”

The bill, A3532, was passed 56-16 by the Assembly in May and 29-6 by the Senate in June. It takes effect in 90 days, Nov. 22, the day before Thanksgiving, but the Division of Consumer Affairs can begin taking any needed administrative actions immediately.

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Michael Symons is State House bureau chief for New Jersey 101.5 and the editor of New Jersey: Decoded. Follow @NJDecoded on Twitter and Facebook. Contact him at michael.symons@townsquaremedia.com.