Small fantasy sports companies lobby to stop possible law

Small businesses that provide fantasy sports said Tuesday that legislation requiring them to pay a $500,000 licensing fee would make New York too expensive for all but industry giants DraftKings and FanDuel.

A new trade association, called Small Business of Fantasy Sports, said "mom and pop type businesses" make up most of the industry. Its 35 members include companies providing daily or season-long games, or both. Players select teams of professional athletes and then win or lose depending on how they perform altogether.

The association also objected to a proposed 15 percent tax on gross revenue, suggesting 5 percent taxes on net revenues instead. The group already has met with key lawmakers and said they're optimistic about getting legislation modified, though they don't yet have commitments.

"Small businesses have been the lifeblood of the fantasy industry for decades," said Alex Kagonovsky, managing partner of Fantasy Football Players Championship. "In fact, smaller daily fantasy sports and season fantasy sports businesses have been operating in New York for many years with thousands of New York customers who have been enjoying our products."

Kaganovsky's New York City-based company has three full-time employees and provides only season-long games. Virginia and Indiana recently passed licensing bills with $50,000 licensing fees, a move also expected to price out all but a few companies, he said.

Matt Schauf, senior writer for Rochester-based Draft Sharks, said the company has about 19,000 subscribers -- fantasy football players who get Draft Sharks' analysis and advice. At least a quarter of its readers look for content specific to smaller providers of fantasy games, he said.

Owner Lenny Pappano said Draft Sharks has five full-time employees.

DraftKings and FanDuel agreed with the state attorney general last week to stop taking bets on their daily fantasy sports games in New York while lawmakers consider legalizing the games. Attorney General Eric Schneiderman had sued them, arguing the daily games constitute gambling that is illegal under current law.

New York's Republican-controlled Senate included the pending legislation with the $500,000 licensing fee in its budget proposal for the upcoming fiscal year. In the Democrat-controlled Assembly, J. Gary Pretlow, who chairs the committee with gambling jurisdiction, said his chamber will pass the bill before legislators adjourn in June, allowing time to craft a law that will survive any legal challenges.

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