DFS Operators Must Prove Segregation of Funds in New York State

NCAA Football

New requirements have now been set in the DFS industry as gaming regulators in the state of New York have requested that operators of daily fantasy sports in the state provide proof that player funds have been segregated from operating funds. Late last week, it was reported that emails had been received by operators from the New York State Gaming Commission with requests for documentation proving that player funds are separate.

Legal Sports Report first revealed the request by gaming regulators that evidence was being sought to clearly illustrate the ‘legal mechanism and internal controls’ to keep player funds safe. The email was sent to operators such as DraftKings and FanDuel, companies that have temporary licensing to operate in the state.

The issue is no doubt a high priority, especially considering the recent filing for bankruptcy by Fantasy Aces, an online daily fantasy sports site. The operator currently owes players over $1.3 million and was provided with temporary licensing to operate in New York, however the company has since been removed from the list of operators with temporary permits.

Information found in the filing for bankruptcy seems to suggest that Fantasy Aces failed to keep player funds separate, which has now caused regulators in New York to take action. The state has been at the forefront when it comes to daily fantasy sports regulation, having been the first state to tackle the activity in regards to legalization.

In late 2015, Attorney General of New York, Eric Schneiderman, investigated the activity and found that sites were unregulated gambling venues. Both FanDuel and DraftKings were sent cease and desist orders which then prompted other AGs to look into daily fantasy sports gaming. By summer of last year, a bill was signed into law that would legalize and regulate the fantasy contests. Other states will most likely look at this recent requirement by NY and seek such proof as well from operators to ensure consumers are safe during DFS gaming.

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