Virginia has just passed the Fantasy Contests Act, thereby becoming the first state to enact legislation specifically regulating fantasy sports. The legislation allows fantasy sports operators to continue offering contests in Virginia, including offering cash prizes, but registration will be required with Virginia’s Department of Agriculture and Consumer Services. The statute is not friendly to small businesses, however, because the registration process requires an annual fee of $50,000 if cash prizes are offered.
Other provisions of the new law prohibit contestants under the age of eighteen or who are employees of a fantasy sports operator, even in contests run by a different operator; require fantasy sports operators to disclose the maximum number of entries per player; to avoid co-mingling player funds with the fantasy sports operator’s own operational accounts; and to file annual audit statements prepared by a certified public accountant.
To distinguish fantasy sports from traditional sports gambling (which remain illegal in Virginia), the Fantasy Contests Act requires that fantasy contests cannot be solely contingent on the score, point spread or performance of any single team or combination of teams or on any single performance of an individual athlete.
Violations of Virginia’s Fantasy Contests Act are punishable by civil penalties of up to $1000 per violation.
Takeaway: The new law is a major victory for the two major fantasy sports operators, DraftKings and FanDuel. Not only does the law allow them to continue doing business in Virginia, the $50,000 registration fee will pose a barrier to entry for potential competitors. Olshan will continue to follow this story to see if additional states follow Virginia’s lead.
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