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Fantasy Sports Companies Seek Legal Clarity In Kentucky

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Fantasy sports betting exists in a legal gray area in Kentucky, but representatives from the industry’s two biggest players, Fanduel and Draft Kings, asked lawmakers to give the companies clarity that they can continue operating in the state.

With the exception of on betting horse races, sports betting is illegal in Kentucky.

Derek Hein, manager of governmental affairs for Draft Kings, said that fantasy sports games don’t count as “sports betting” because they are “not outcome determinative.”

“What we’re doing is taking basically the lineup that you have, you’re acting as general manager or owner of your team, and putting together a group of players that you think will outperform the person or people that you’re playing against,” Hein said.

Hein estimated that as many as 100,000 Kentuckians are playing at least one of the two major fantasy betting sites.

The businesses have been questioned by state governments across the country who are skeptical of the legality of the practice.

In March, FanDuel and DraftKings stopped operating in New York after the state’s attorney general said the games amounted to illegal gambling.

Last week New York Gov. Andrew Cuomo signed a law defining fantasy sports as a “game of skill,” thereby legalizing it. The law also forbids minors from playing, requires fantasy sports companies to pay the state an annual $50,000 fee and levies a 15 percent tax on the companies’ revenues.

Sen. Chris McDaniel, a Republican from Taylor Mill, said lawmakers needed to discuss taxing the organizations if they’re allowed to operate in the state.

“We have needs in this state, as many others, and sometimes demands for dedicated revenues for particular problems,” McDniel said. “I think that’s a very relevant conversation.”

FanDuel legal counsel Cory Fox said the companies were “open to a discussion about taxes” but emphasized that the companies are still technically “startups.”

Rep. Larry Clark, a Democrat from Louisville said he was concerned that opening the door to fantasy sports betting would siphon players away from other gambling-type industries.

"We have the lottery here and we have the thoroughbred industry," Clark said. "We have a limited number of disposable dollars. I'm concerned that we'll drag money from them."

Three states currently have taxes in place on fantasy sports companies.

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