Doom: DFS
Last year I wrote an article for my tax blog on taxes and Daily Fantasy Sports. One of the conclusions I drew was that DFS is almost certainly gambling for tax purposes. One state has more-or-less come to the same conclusion: Michigan. Earlier this week Michigan's gambling commission stated that DFS was illegal in the state. As of this writing, the big two (DraftKings and Fan Duel) have not left Michigan; however, PokerStars' DFS product (they acquired one a couple of weeks ago) has banned new sign ups from the state.
I think this is the beginning of many states that will come to the same conclusion.
From a tax perspective, it's clear that DFS is gambling. There's a prize, consideration, and chance. You take [some player] in today's game. He has hit the opposing pitcher well in his career but tonight he has a cold and doesn't. Or whatever. Unless DFS falls into some other category of income (and it doesn't), that makes DFS gambling.
That does not necessarily mean it's gambling for each state. Some states have rules where if skill is greater than chance it's not gambling. However, most states do not have that rule; instead, most states look at just an element of chance. New York--where Fan Duel is headquartered--has such a rule. I don't think this bodes well for the long-term health of DFS.
Adding to this the Nevada Gaming Control Board is investigating DFS. Why? Well, if it's gambling and you're offering it in Nevada, might not these companies need licenses? And since the only kind of online gambling that's legal in Nevada today is poker, might not these businesses be illegally operating in the state? Jim Murren, Chairman of both MGM Mirage and of the American Gaming Association, agrees that DFS is gambling.
If you're a DFS player and doing well, enjoy the days right now. Doom is coming, sooner rather than later.
I think this is the beginning of many states that will come to the same conclusion.
From a tax perspective, it's clear that DFS is gambling. There's a prize, consideration, and chance. You take [some player] in today's game. He has hit the opposing pitcher well in his career but tonight he has a cold and doesn't. Or whatever. Unless DFS falls into some other category of income (and it doesn't), that makes DFS gambling.
That does not necessarily mean it's gambling for each state. Some states have rules where if skill is greater than chance it's not gambling. However, most states do not have that rule; instead, most states look at just an element of chance. New York--where Fan Duel is headquartered--has such a rule. I don't think this bodes well for the long-term health of DFS.
Adding to this the Nevada Gaming Control Board is investigating DFS. Why? Well, if it's gambling and you're offering it in Nevada, might not these companies need licenses? And since the only kind of online gambling that's legal in Nevada today is poker, might not these businesses be illegally operating in the state? Jim Murren, Chairman of both MGM Mirage and of the American Gaming Association, agrees that DFS is gambling.
If you're a DFS player and doing well, enjoy the days right now. Doom is coming, sooner rather than later.