California Sports Betting is a No-Go, But DFS Remains Alive

Although California sports betting has virtually zero chance of getting legalized in 2024, there’s a chance daily fantasy sports sites will be able to continue operating inside The Golden State.

As if you needed any more proof that things change in the sports gaming industry on a whim, this potential development flies in the face of recent news. Just last week, it looked like daily fantasy sports sites in California would inevitably be forced to shudder their operations. Not only were other states cracking down on DFS companies in droves, but the continued absence of sports betting in California didn’t seem like it would bode well for daily fantasy operators.

And to be absolutely certain, it still may not bode well for DFS providers. California remains among the states that has sent or said they intend to send cease and desist letters to daily fantasy sites operating inside the market. This includes companies like Betr, Underdog Fantasy, PrizePicks and even DraftKings and FanDuel.

However, it now appears that tribal leaders in California are open to meeting with at least one daily fantasy sports site to discuss a prospective agreement. Should we read anything into this? Or is this yet another false flag? Let’s (try to) find out.

Why Are DFS Sites Currently Allowed to Operate in The Golden State Even Though California Sports Betting Is Illegal?

Daily fantasy sports have for the most part willingly existed in a gray area. Many states don’t have explicit laws for or against daily fantasy sports sites. That’s why operators have been allowed to continue providing services in The Golden State even as multiple attempts to legalize actual California sports betting have failed.

Recently, though, the ambiguous nature of daily fantasy sports is no longer working. Both states with and without legal sports gambling have come to view DFS providers like they do other online sportsbooks in the USA. This is to say, they don’t consider the services they offer “fantasy.” They are treating them as actual sports bets, and without sports gambling licenses in place, this has led to mass exodus of sites like PrizePicks in Florida, New York and other places.

While DFS providers maintain their models differ from online sportsbooks in the United States, their “Pick ‘Em” contests are almost indistinguishable from online sports prop betting. These “Pick ‘Em” transactions have customers investing in performance-based results of real players. State regulators argue that tying in live-game results negates the “fantasy” in daily fantasy sports. And, well, that’s how the DFS industry ended up here, under the microscope of a vast many states—including California

PrizePicks Could Strike a Deal that Allows Them to Operate Inside the California Market

PrizePicks is among the companies that has been most impacted by the recent crackdown on daily fantasy sites. As we noted above, the murky DFS business model is under siege. And it’s left certain DFS companies scrambling.

Most have generally vacated markets when faced with any pressure. PrizePicks, on the other hand, has tried preserving their place inside certain markets by offering to negotiate exceptions or changes to DFS laws. Not surprisingly, they’re hoping to do this in California, as Mike Mazzeo explained for Legal Sports Report:

“A coalition featuring several large California gaming tribes may meet with PrizePicks to discuss the operator’s letter regarding the legality of fantasy sports in the state. The California Indian Nations Gaming Association (CNIGA), which has 52 member tribes, submitted its own letter to the state attorney general as part of the office’s ongoing review of the fantasy sports pick’em issue. In its letter, PrizePicks claims “it is well-established that ‘games of skill’ are legal in California and not considered to be forms of gambling.” “We’ve read them. We’re looking at them. We’re considering potentially sitting down (with PrizePicks) and discussing their letter with them,” CNIGA chairman James Siva told PlayUSA at the Western Indian Gaming Conference last week.”

Gaining the support of tribes is key for PrizePicks and other DFS companies. Tribes currently have gaming exclusivity in the state. That’s why it’s virtually impossible to legalize California sports betting with their support. The same is going to hold true for daily fantasy transactions.

Will Daily Fantasy Sports Sites in California be Allowed to Stick Around?

The legality of daily fantasy sports betting in California remains under review by state and tribal officials. But if we had to guess, this will all end with DFS sites exiting the California market.

Make no mistake, we could absolutely be wrong. Companies like PrizePicks could offer to pay certain (and extravagant) fees or tax rates to convince regulators and tribal officials that they should be allowed to operate in-market.

Even so, the ongoing California sports betting struggle makes us think there’s no agreement to actually be struck. Tribes in The Golden State have been steadfast in their refusal to allow top online sportsbooks in the USA from operating independently in the region. This stance is basically what fueled the failed attempt(s) to green light California sports betting in 2022. Why would they all of a sudden welcome online daily fantasy sports providers, some of whom, like FanDuel and DraftKings, also operate licensed online sportsbooks?

Maybe we’re missing something. This current review of California daily fantasy sports is still in its infancy. And until PrizePicks or another company actually sits down to speak with members of CNIGA, we can’t be sure how this will play out.

Heck, even if tribes hash out some agreement with DFS providers, that doesn’t mean state officials will follow suit. Pro-gambling members could try to block any proposal as recourse for the failed California sports betting legalization attempts. Like always, we’ll just have to wait and see what happens—though, as we already said, we wouldn’t hold our breath for a DFS in California breakthrough.

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