California Senate backs rules for fantasy sports betting

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Assemblyman Marc Levine, D-San Rafael, a member of the Assembly Governmental Organization committee, drinks from a San Francisco 49ers mug while listening to testimony about online fantasy sports gaming at the Capitol in Sacramento. (Rich Pedroncelli/AP)
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SACRAMENTO — California’s state Assembly approved minimal regulations Wednesday for the fast-growing daily fantasy sports industry amid a national debate over whether the online games violate states’ gambling laws.

The bill by Assemblyman Adam Gray, D-Merced, would legalize the games while requiring that operators pay regulatory fees and be licensed by the state Department of Justice. The bill, AB1437, would also require operators to undergo background checks, pay taxes on their profits and report players’ winnings to the state so they can be taxed. They would also be required to ensure that players are adults and weed out fraud.

“It’s our responsibility as legislators to make sure they’re playing in a safe and regulated game, where people are not being taken advantage of, where identity theft is not going on, where underage children are not playing,” Gray said.

Fellow Democratic Assemblyman Marc Levine of San Rafael says the games are a form of gambling that cannot be regulated by lawmakers. Such games can only be approved by voters, he said, in the same way that the state lottery, horse racing and tribal casinos were allowed.

“Whether we like it or not, the California Constitution is clear that gambling must first be approved by voters,” said Levine, who cast the sole vote against the bill Wednesday.

He has asked Attorney General Kamala Harris to weigh in on the legality of the games, as have attorneys general in other states. But she has yet to issue an opinion or discuss fantasy sports publicly.

The debate centers on whether the games rely on skill or chance.

Participants pay entry fees to choose players and can win money based on the professional athletes’ performances in the real world.

If they are deemed games of chance, they may be illegal in California along with several other states where regulators have stepped in. If they are games of skill, they may face increased regulation.

The measure was approved on a 64-1 vote and now goes to the Senate.

The high-stakes debate is drawing attention well beyond the Capitol in the nation’s most populous state.

The Fantasy Sports Trade Association is targeting Levine with critical radio and online ads in the San Francisco Bay Area. Gray’s ballot measure committee, meanwhile, received a $5,000 contribution from DraftKings last week.

DraftKings and rival FanDuel have become a major source of revenue for professional sports teams, and their ads were everywhere on television during this NFL season.

“We appreciate that the Legislature is taking thoughtful and appropriate action to ensure that the millions of Californians who play daily fantasy sports can continue to enjoy the contests they love,” Peter Schoenke, chairman of the Fantasy Sports Trade Association, said in a statement.

The industry says it has similar bills pending in more than two dozen states. However, the games are banned by laws in six states, and attorneys general in New York, Illinois and Texas have issued opinions that they are illegal games of chance, though the industry is challenging the New York and Illinois decisions in court.

Among other actions lawmakers took Wednesday:

— Assembly members narrowly voted to require large California companies to pay double-time for employees working on Thanksgiving.

— The Assembly approved a bill allowing voters to post photos of their marked ballot on Facebook or Twitter, eliminating a rarely enforced law over concerns about violating the principle of a secret ballot.

— The Senate voted to outlaw compassionate release from prison for people convicted of killing police officers.

— Over industry opposition, the Senate approved stricter safety standards for charter buses following a deadly 2014 crash.

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