TRENTON — New Jersey lawmakers are considering regulating and taxing daily fantasy sports sites, proposing rules for an industry that has come under scrutiny from law enforcement in other states.
Daily fantasy companies such as DraftKings already operate in the state. Lawmakers said a bill advanced by an Assembly committee Monday was intended to protect the sites’ users.
The legislation wouldn’t affect season-long fantasy games for which operators don't collect fees. Ten other states have passed laws to legalize or regulate the daily fantasy sports industry, including New York, Maryland, Kansas, and Colorado, according to Steven P. Perskie, a former chairman of the New Jersey Casino Control Commission.
In written testimony before the Assembly Tourism, Gaming, and Arts Committee, Perskie, who is also a former state legislator and judge, said fantasy sports were “games of skill,” not “gambling,” and therefore could be regulated by the Legislature.
DraftKings and the site Fan Duel were forced to shut down in New York last March by the state attorney general, who found they had engaged in deceptive advertising practices. But the companies, which have since announced a merger, reached settlements in October, and the state legalized daily fantasy contests.
In response to such problems in other states, New Jersey lawmakers said they wanted to establish rules here to protect consumers of daily fantasy gaming.
Users compete by building a roster of players in football, basketball, or baseball and competing with imaginary teams.
Under the legislation, the state Department of Law and Public Safety would be able to issue permits to operators such as DraftKings and casinos.
To play, users would have to be at least 18.
Based on industry and census data, the Legislature’s nonpartisan research office estimates that about 1.25 million Garden State residents play daily fantasy games, spending a total of $625.8 million annually.
In the spring, state senators advanced a bill that would impose a 9.5 percent tax on gross revenues. Given that providers such as DraftKings and Yahoo typically take a 10 percent cut of entry fees, the tax would generate $5.8 million in annual revenue for the state, according to the Office of Legislative Services.
The office said it could not project how much revenue the state would net long-term.
On Monday, the Assembly committee approved an amended version of the Senate bill, boosting the tax rate to 10.5 percent of gross revenues.
The Assembly sponsors are Vincent Mazzeo (D., Atlantic), John Burzichelli (D., Gloucester), and Ralph Caputo (D., Essex).
Each house of the Democratic-controlled Legislature would need to pass the same version of the bill in order to send it to Gov. Christie, a Republican.
This article has been updated to reflect the following correction: A previous version misstated which fantasy games the legislation would affect.