A level playing field for fantasy sports

More than 2.5 million fans are expected to attend games at Coors Field this season. And many are expected to be playing along on their computers and smartphones, too, with fantasy sports enhancing the fan experience like never before.

That is why Colorado lawmakers are on the right track with proposed legislation to preserve fans’ access to these services. House Bill 1404, which passed the House Monday, clarifies that fantasy sports contests are not gambling, and recognizes that playing in a fantasy baseball league is a legal and fun way to enjoy sports.

Colorado lawmakers should go a step further in their proposed legislation by distinguishing between paid and free fantasy contests. This is a vital distinction when it comes to how the state taxes these contests through registration and renewal fees.

As currently proposed, the legislation wisely treats a group of friends playing in a free contest differently from contests where players pay entry fees to the operator. HB 1404 avoids overly burdensome registration and renewal fees on contests that collect no entry fees from players. It would allow the free contests to stay on the field.

However, HB 1404 would impose steep registration fees and annual tariffs on providers of fantasy sports contests. The current bill does not specify the exact amount of these fees, supposedly leaving that determination for the end of the legislative session, when the bill has already made it through the committee process.

Will the total be $1 million? $100,000? $50,000? Just for the privilege of a small operator opening their doors to Colorado sports fans? Fees of that magnitude would effectively eliminate many start-up fantasy contests operators wanting to provide new services to Colorado sports fans. And since many start-up and small operators have little net revenue, the initial and annual charges are a significant barrier to entry for new providers of paid fantasy services and could force existing services to abandon the Colorado market altogether.

Instead of a flat amount, any fees or taxes assessed on paid fantasy contests should be a percentage of net entry fee revenue. This fair approach would impose a uniform tax rate on the net of entry fees paid to participate in a daily fantasy contest and the cash prizes paid out to those participants. This approach lets small businesses grow and contribute more to the state’s revenue. Most important, Colorado fans can continue to enjoy their fantasy contests and the state can ensure a level playing field for operators.

As fantasy contests become synonymous with America’s favorite pastime, Colorado lawmakers have an opportunity to keep it accessible, transparent, and fun for fans and businesses. Colorado legislators should seize this opportunity, amending HB 1404 so it sets high standards for fantasy contests while ensuring everyone from fantasy players to the operators hits a

home run.