Connecticut Sports Gambling Law Hands FanDuel And DraftKings A Fantasy Sports Duopoloy
Last Thursday, Yahoo officially exited the Connecticut fantasy sports marketplace in response to the state’s new law that requires any sports gambling or fantasy sports operator to first reach a cooperative agreement with either the state lottery or one of its two sanctioned tribes. At the same time, Connecticut granted DraftKings and FanDuel special permission to carry on their fantasy sports and sports gambling businesses, with the companies having struck deals with the Mashantucket Pequot Tribal Nation and Mohegan Tribe, respectively.
Although some of the smaller daily fantasy sports operators may be flouting Connecticut’s new law, Yahoo’s departure from the Connecticut fantasy sports market, in essence, was a Hobson’s choice. As a public company, Yahoo could not reasonably play a game of cat and mouse with the state’s regulatory body. After the state’s two tribes chose other business partners, Yahoo simply had to walk away. pgslot
Nevertheless, by leaving Connecticut, Yahoo leaves consumers in the state with just two reasonable options for continuing to play daily fantasy sports in DraftKings and FanDuel—a result that should not be looked upon favorably by free-market advocates. Meanwhile, one can reasonably expect there will be no businesses operating in Connecticut that will offer full-season, pay-to-play fantasy sports.
The loss of Yahoo as a competitor from the Connecticut market further harms Yahoo’s ability to compete in offering pay-for-play fantasy sports games on a national level. This is because, unlike sports gambling, fantasy sports markets are largely national. As DFS participants generally seek to enter contests with the largest possible prize pool, companies with a national footprint are therefore most likely to flourish.
Yahoo’s exit from Connecticut marks just the latest turn of events that is making it more difficult for daily fantasy sports operators to compete against the DraftKings-FanDuel duopoly. Last July, the Internal Revenue Service issued a general advice memorandum that called for DFS companies to pay a 0.25% to 2.00% “excise tax” on entry fees as a form of “wager” under Internal Revenue Code §§ 4401 and 4411—a decision that has a disproportionately adverse effect on small operators.
