New York bill might bar state residents from online handicapping contests

A bill signed Thursday by New York Gov. Andrew Cuomo legalizing online daily fantasy sports contests in the state but prohibiting the same contests for horse racing is raising concerns about the future of online horse-racing activities in New York.

The bill, which will allow New York residents to enter contests on popular fantasy sites such as FanDuel and DraftKings, contains a prohibition on “DFS contests” for horse racing and collegiate sports events. While racing officials contacted Thursday said they were still uncertain about the impact of the language, several said they believed that the language would prohibit racing-related fantasy-contest operators such as Derby Wars from doing business with New York residents.

The language has also led the operators of online handicapping tournaments to seek legal advice about whether the provision would mean blocking New York residents from the contests.

Daily Racing Form Inc. is a leading host of online handicapping tournaments in the U.S. and runs the official online qualifying site for the National Handicapping Championship. Ken Kirchner, the senior vice president for DRF Tournaments, said he could not comment on the New York bill until the company had a chance to assess the impact of the racing-related language.

In addition to DRF, many account-wagering operators and racetracks host online tournaments, though many only reach the local population.

Keith Chamblin, the chief operating officer of the NTRA, which administers the NHC, said the association does not know how the law will impact online tournaments but noted that the association requires that “all NHC qualifiers be conducted in accordance with all state and federal laws.”

“How the New York Daily Fantasy Sports Law will impact online horse-racing contests remains to be seen,” Chamblin said. “Each contest operator must make that determination for itself.”

Several racing executives in New York who spoke on the condition of anonymity because of the uncertainty created by the language said they did not believe the provision would prevent New York residents from participating in online handicapping tournaments as long as cash prizes were not given out daily, as is the case with FanDuel and DraftKings. However, they did say that Derby Wars and sites like it would likely have trouble operating in New York under the new law.

Mark Midland, the co-founder and chief executive of Derby Wars, did not return a phone call Thursday. Although a small business, Derby Wars operates the most popular Internet site for racing fantasy contests.

Late last year, The Stronach Group, a racing company that owns racetracks and an account-wagering operation, sued Derby Wars, claiming that the site did not properly compensate racetracks for using their races as a basis for payouts. The suit remains unresolved.

Joe Faraldo, the president of the Standardbred Owners of New York, said that harness-racing interests had pressed for a provision in the bill that would require racing fantasy sites to pay 3 percent of the gross revenue from any contests that used New York content to Standardbred and Thoroughbred industries in the state. Faraldo said that Midland of Derby Wars agreed to that provision just as the bill’s language was being finalized.

However, just prior to the bill being introduced, representatives of offtrack betting companies then pressed legislators to add another provision that would require racing fantasy sites to also pay 5 percent of the gross as a source-market fee to the OTB in the customer’s market area, Faraldo said. That led Midland to withdraw his support for any payments to the racing industry, and legislators then inserted the ban on racing fantasy sites, Faraldo said.

“I thought we had a deal that everyone can live with,” Faraldo said. “I tried to talk the legislators out of the market-origin fees but couldn’t do it.”