Attorney General George Jepsen warned legislators in a formal legal opinion Monday that a legislative attempt to collect $9.5 million from fantasy sports contests could jeopardize revenue-sharing agreements with the tribal casinos that produce more than $200 million.
In response to a request by the Senate’s Democratic leadership, Jepsen says there is both “a high degree of uncertainty” and “a substantial risk” as to how efforts to take a cut of the fees paid to the popular online sports industry would affect casino revenue.
Senate President Pro Tem Martin Looney, D-New Haven, who requested the opinion with Senate Majority Leader Bob Duff, D-Norwalk, said he doubts the legislature would go forward with any legislation that might jeopardize casino revenue.
Connecticut now is paid 25 percent of the gross revenue from slots at the two tribal casinos, Foxwoods Resorts Casino and Mohegan Sun, under deals reached in the early 1990s by the administration of Gov. Lowell P. Weicker Jr.
Slots revenue has been steadily dropping in the face of increased competition in the Northeast, but the two tribes still paid $263 million last year to the state in return for the exclusive right to offer slots.
A proposed bill would impose an 8.75 percent surcharge on entry fees paid to the companies conducting fantasy sports, a multi-billion-dollar industry dominated by FanDuel and DraftKings. The legislature estimates that could raise $9.5 million annually.
The daily fantasy sports industry describes itself as a game of skill, not a form of gambling. Jepsen sidesteps the issue of whether it is gambling, but he notes that the state’s agreements with the tribes broadly define slots as “video facsimile machines.”
“There presently exists a high degree of uncertainty about whether daily fantasy sports contests constitute games of skill or games of chance,” Jepsen wrote.
Jurisdiction over the state’s criminal gambling laws rests with the Office of the Chief State’s Attorney, but Jepsen noted that attorneys general in other states “have concluded, either formally or informally, that these games constitute illegal gambling under their states’ respective criminal laws.”
Fantasy sports contests predate the internet, but they are waged over computers and smart phones, possibly falling under the state’s broad definition of “video facsimile.”
“I want to emphasize that, if these issues were ever to be litigated in court, there are sound arguments that could be made that the Compacts and MOUs are not implicated by daily fantasy sports contests,” he wrote. “Nonetheless, no one can predict with any level of certainty how a court, if faced with these issues, would rule.”