Major Daily Fantasy Sports provider DraftKings has spent millions of the dollars over the last few years mainly aimed at individual state legislatures in an attempt to become legal in major US states. One of the leading technicalities they are trying to impress upon lawmakers is that what they provide is a game of skill, not gambling. A special commission convened by the state of Massachusetts did not see it that way and while they recommended that the state legislature pass legislation to legalize and regulate Daily Fantasy Sports, at the same time they recommended that DFS be classified as gambling. But in another twist, the same commission recommended that Massachusetts continue to prohibit online and real casino gambling.
The victory is hollow for DraftKings for two reasons. First, it opens them up to be in a highly regulated industry within Massachusetts and be subject to extreme ´sin´ taxes. But probably even more damaging is the fact that if the state legislature does follow the recommendations of the commission, it could be something other state legislatures use as their starting point when they consider legalization of DFS. DraftKings as can be expected is not happy at the prospect of being able to operate in all 50 states, but be at the mercy of individual state legislatures when it comes to tax rates and regulations.
DraftKings did not take the decision sitting down, they immediately threatened not only to not operate in Massachusetts but to also move their HQ out of the Boston area if legislators follow the recommendation of the commission. DraftKings stated the have more than 300 employees in Massachusetts, however, it is unknown how many of them work through the main company HQs and how many of them are contract employees who are unlikely to leave the state. DraftKings is already operating at huge losses each year as it battles for market share against FanDuel with both companies estimated to be losing over a hundred million dollars each year. Adding on the burden of high taxes, it is very unlikely there is any path to profitability for either DraftKings or FanDuel.