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Fantasy Sports Under Scrutiny in New York

New York's Standardbred industry warned of the growing financial consequences of racing-based daily fantasy sports sites, while a major off-track betting corporation in the state said OTBs should have the authority to offer fantasy sports contests to customers.

Those were among the issues raised at a lengthy Dec. 8 hearing by Assembly lawmakers looking into the future of the daily fantasy sports industry in New York, which Attorney General Eric Schneiderman calls illegal bookmaking sites. He wants to stop them for operating in the state.

Noticeably absent from the lengthy hearing, called by three separate Assembly panels, were representatives from the state's Thoroughbred industry. Assembly Racing and Wagering Committee chairman Gary Pretlow said he was surprised no one from the Thoroughbred industry offered testimony, considering what he said is evidence that racing-based DFS sites are redirecting business away from the state's pari-mutuel industry.

"We did invite NYRA. They chose not to come for whatever reason," Pretlow said of the New York Racing Association, which is operating under a state oversight control phase until at least the end of next year.

The Assembly panels, including the Racing and Wagering Committee, called the hearing shortly after Schneiderman in November issued cease-and-desist orders to the nation's two biggest DFS sites: DraftKings and FanDuel. The attempt to close the two sites, and the rest of the industry to New York consumers, is now the subject of a state court battle.

The majority of the hearing's testimony and questions were posed to the industry, including lawyers for FanDuel and DraftKings, who set out a long explanation of why DSF is a skill-based contest and, despite Schneiderman's legal protests, does not primarily involve chance and, as a result, is legal under New York law.

The heavy reliance on legal explanations by the industry received a mild rebuke from Pretlow, who said the legal aspects will be left to a court while legislators are trying to determine what role they may have in regulating the fast-growing industry. Though invited, no one from Schneiderman's office appeared before the panels at Tuesday's hearing.

Joe Faraldo, president of the Standardbred Owners Association of New York, used most of his time to raise concerns about what he believes is a loss of pari-mutuel business to racing-based DSF sites such as DerbyWars. Faraldo said the sites are marketing themselves as less intimidating than pari-mutuel wagering at tracks or advance deposit wagering platforms.

"And why is it significant that these sites are shifting horseracing fans in New York State away from tracks and OTBs to their 'simpler,' unregulated websites? Because every wager made on DerbyWars or Horse Tourneys instead of at Yonkers Raceway, or at one's local OTB, represents money taken directly out of the pockets of New York State schools, municipalities, breeding farms and feed stores," Faraldo told lawmakers.

Faraldo said the state "cannot allow this to continue."

Groups concerned with predatory gambling issues called on lawmakers not to take steps to undo what Schneiderman is attempting in the courts. Since his legal action, measures have been introduced to explicitly legalize the DFS industry in New York. There have also been calls to amend the state constitution to allow the contests or, as critics term their offerings, gambling.

If New York is going to permit DFS, though, one OTB corporation said it wants in on the action.

Michael Nolan, executive vice president of Western Regional Off-Track Betting Corp., which is owned by county and municipal governments and includes the harness track and video lottery terminal casino in Batavia, said it has plans if authorized by the legislature to begin its own DFS operation.

"We're ready to start tomorrow" Nolan said of a fantasy sports business. "We think it's a great business opportunity for us."

The OTBs, he said, will offer a way for state and local governments to share in revenue from DFS contests, a potentially lucrative lure for some state officials that is now not available through the growing list of DFS sites.

After the hearing, Pretlow said he disagreed with the DSF industry's explanation that the contests are legal and that he believes they violate the state's penal code.

"If the courts rule that it's legal, which I don't think they will, then I'm 99% sure that we will put through legislation having to do with regulating DFS," he said of rules pertaining to such matters as consumer protections and problem gambling.

Still, Pretlow said he believes Schneiderman "has a very strong case" to shut down the sites.

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