Daily Fantasy Sports Sites in South Carolina to Close?

As gambling regulators in the United States continue to crack down on daily fantasy sports sites, concern is mounting among customers who play these games in places without any form of legal sports gambling. And yes, this includes the use of daily fantasy sports sites in South Carolina.

Just so we’re clear: Daily fantasy sports in South Carolina are not legal. But they also aren’t illegal. While The Palmetto State has explicit laws that prohibit sports betting in South Carolina, daily fantasy sports essentially operate under a different umbrella altogether.

This is not a unique setup. Whether we’re talking about states with legal sports betting or states without legal sports betting, the daily fantasy sports sector often exists in a gray area. Until recently, many places didn’t have specific laws governing daily fantasy sports activity. But as more and more states legalize sports betting, they have come to see daily fantasy as a form of sports gambling. This, in turn, has jeopardized the entire business model for operators who exclusively provide such services.

In fact, “jeopardized” might even be putting it lightly. Many daily fantasy operators have closed up shop and entirely exited certain markets. The question is: Will daily fantasy sports sites in South Carolina also be forced to shut down?

The Status of Daily Fantasy Sports in the United States

Before we get to the future of daily fantasy in South Carolina, we first need to understand what’s happening around the rest of the country. The gist of everything: Gambling regulators are starting to treat DFS operators like they do online sportsbooks in the United States. This is to say, they view daily fantasy as a form of gambling rather than a game of skill or, well, fantasy.

Many have viewed this shift in interpretation as inevitable. In states with legal sports betting, licensed sports gambling operators are likely peeved by DFS sites setting up shop without needing to be licensing fees or the same amount of tax revenue. In states without legal sports betting, meanwhile, opponents of gambling are starting to question why DFS is allowed at all.

On top of all that, even states with specific daily fantasy laws are starting to re-evaluate their stance on the business model. Most recently, Massachusetts gambling regulators started taking action against DFS sites—even though The Bay State originally crafted laws specific to the industry. DFS operators such as Betr, PrizePicks, Underdog Fantasy and more are now in danger of being shuddered in Massachusetts.

Some version of this is happening all over. Daily fantasy sports sites in New York have already exited the market. The same thing is expected to happen to DFS sites in Florida by the end of March.

The main issue in all of this? That would be the types of “games” DFS operators allow customers to play. Their events entail investing money on performance-based outcomes involving real-life players. So, regulators across the country now argue that their business model has transitioned from fantasy to full-blown sports betting.

Daily Fantasy Sports Sites in South Carolina are Expected to Face Extra Scrutiny

Discussions surrounding the future of legalized sports betting in South Carolina remain mostly dormant. Optimists are hopeful that’ll change over the next year, as The Palmetto State sees the benefits the launch of sports betting in North Carolina brings to The Tar Heel State. Immediately, it also seems as if South Carolina is not concerning themselves with the legality of daily fantasy sports sites. As Matthew Waters wrote for Legal Sports Report:

“South Carolina is a gray state when it comes to daily fantasy sports. That means while it’s not illegal, it also isn’t regulated and taxed by a gaming commission. DFS operators do accept contest entries from within the borders of South Carolina. This includes the biggest DFS operators including DraftKings, FanDuel, PrizePicks and Underdog.”

Daily Fantasy providers have carved out an entire business model on the back of “gray states” like South Carolina. They have thrived on the concept that what they offer is not actual sports betting.

But as that logic falls apart in other states, it would be foolish to believe DFS operators also won’t pique the attention of legislators in South Carolina. And it has less to do with the state’s stance on sports betting and more to do with financial implications.

Providers of DFS competitions do not get taxed like other online sportsbooks in the USA. They also aren’t required to pay licensing fees or contribute to problem gambling funds. This will, without question, eventually become an issue for daily fantasy sports sites in South Carolina. They won’t want to facilitate a sports betting loophole and reap smaller tax revenue.

Anything is Possible When It Comes to DFS in South Carolina

We will stop short of saying DFS sites in South Carolina are doomed. Daily fantasy players in The Palmetto State can take solace in that.

State legislators can technically hash out an agreement that increases the amount of taxes DFS sites pay. And this can be done without the legalization of South Carolina sports betting.

Indeed, many DFS companies might prefer this route to the current state of affairs. It would cost them more money up front, but it would also safeguard them from getting nudged out of the market entirely.

Still, negotiating with DFS operators on the legality of their business would represent a departure from South Carolina gaming norms. Many key officials have been steadfast in their opposition to sports gambling in The Palmetto State. Why would they view DFS any differently?

That is a question to which we don’t have an answer. And until we do, the prevailing assumption is that daily fantasy sports sites in South Carolina are operating on borrowed time.

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