Posts Tagged ‘DFS’

Here We Go Again…

Tuesday, October 30th, 2018

A few years ago I penned a post titled “Taxes and Daily Fantasy Sports: The Duck Test.” To remind everyone,

If it looks like a duck, walks like a duck and quacks like a duck, then it just may be a duck.

The duck test came up yet again yesterday in Albany, New York. The New York legislature passed a law legalizing Daily Fantasy Sports (DFS), even though the New York state constitution specifically prohibits gambling. The New York legislature statutorily said, “DFS isn’t gambling.” Yesterday, Judge Gerald Connolly said the legislature was wrong.

Last year a lawsuit was filed seeking a ruling on whether DFS is New York was legal. (The case is titled White, et. al., v. Cuomo, et. al.) Yesterday, the ruling came out. (My thanks to Legal Sports Report who published the ruling. LSR is a vital resource for anyone interested in sports betting in the United States. But I digress….) The issue is the same one I raised back in 2014.

Unfortunately, many states look at just an element of chance to determine if something is gambling. And there’s no doubt that daily fantasy sports have such an element. [emphasis in original.]

In this case, Judge Connolly ruled that based on the New York constitution if there’s a contest with an element of chance, a prize, and consideration and the constitution doesn’t state that activity isn’t gambling, it is gambling. Gambling is prohibited by the New York constitution, so the constitution will need to be amended in order for DFS to be legalized.

I expect this decision to be appealed, and a stay put on any adverse impacts for DFS in New York…for now. The problem is that the ruling seems right to me. If the New York prohibition against gambling was statutory, DFS could be legalized by statute. Since the New York prohibition is in the state’s constitution, a constitutional amendment appears to be necessary. This does not bode well for the future of DFS in New York.

Additionally, this ruling points out something that should be obvious regarding sportsbetting. The Supreme Court decision in Murphy v. NCAA allows sportsbetting to be legalized state-by-state. In some states, that just means passing a new law. In many states, though, that will mean amending the state’s constitution. Changing a state’s constitution takes a lot more time and effort.

It’s One 1099 Per Person, Or the Most Stupid and Hilarious Thing I’ve Seen in Some Time

Friday, September 29th, 2017

One of my clients, Barri Brown (all names in this post are fictitious), was missing a 1099 issued by one of the two large Daily Fantasy Sports (DFS) companies. It didn’t show on her Wage & Income Transcript, so she called their accounting department and requested a copy. A few days later they emailed it to her. She forwarded it on to me and I entered it into her return.

And then I took a look at the pdf and saw that it was 18 pages long. I wondered what kind of attachments this company would send on a 1099? Perhaps a breakout of state tax issues (although that didn’t apply to my client). Or perhaps some internal accounting records detailing Ms. Brown’s profits and losses.

How about the 1099s for everyone this company serviced with the last name of Brown? The second page is that of Brett Brown, the third page is Daniel Brown, etc. At least only the last four digits of the social security numbers were shown (but both my client and I know the exact amount of Brett Brown’s DFS income from this site in 2016).

In one way, this is hilarious. Apparently it was easier for that clerk to email the 1099s for all the Browns to my client than to just send the specific 1099. (I have to wonder about how they create their 1099s, but that’s a question for another day.)

In another way, it’s stupid. Hasn’t this company heard of privacy concerns and laws? My client has every right to know her income, but absolutely no right to know Brett Brown’s income (unless Mr. Brown elects to tell one of us).

But my client asked a very good question. “That is HILARIOUS and absurd and maybe illegal?” I’m not an attorney, so I can’t state with certainty whether this was a violation of the law. The reality is that this was almost certainly a stupid error, and there wasn’t the intent to do something illegal.

(Tax professionals fall under the provisions of the Federal Trade Commission Act. If a tax professional were to deliberately do this, it definitely could be a violation of the FTC Act.)

Unfortunately, the data breach at Equifax and this act of stupidity reinforce my belief that businesses need reminders to treat data security very seriously. My client used an Employer Identification Number (EIN) with the DFS company; I strongly recommend that sole proprietors (like my client) do that whenever possible. A stolen EIN (for a sole proprietor) can’t be used to file a personal tax return.

Let me give a helpful hint to those issuing 1099s and sending them out: It’s one to a customer. Barri Brown doesn’t need Steven Brown’s 1099. Luckily for this company, my client is able to laugh this off (as am I). The problem is that if this happened to Ms. Brown, it likely happened to Mr. Nelson and others.

NY Judge Rules Against DFS Sites

Friday, December 11th, 2015

New York Judge Manuel Mendez granted the New York State Attorney General a preliminary injunction that bans DraftKings and FanDuel from operating in New York. Both sites will appeal, but for now daily fantasy sports (DFS) is gone from the Empire State.

As for legislative solutions, there’s an additional issue raised by attorney Daniel Wallach this morning: The Professional and Amateur Sports Protection Act of 1992. This act banned traditional sports betting in all but four states. Mr. Wallach believes that the law could be read to ban DFS, too:

This decision shouldn’t be a surprise, and I expect it to be upheld on appeal. (Note that I am not an attorney, so please don’t take what I write as legal advice.) As I wrote back in mid-November, I expect more states to ban DFS while some will move to explicitly allow it (by regulating it). Remember that the first instinct of any regulator is to ban anything that’s new. With DFS not only is that an issue, there’s also the dubious legality of it.

UPDATE: DraftKings and FanDuel filed appeals. Both sites received temporary stays against the original injunction until January 4th.