Daily fantasy sports companies could see 15 percent tax on revenues
A proposal on Beacon Hill to permanently legalize daily fantasy sports providers would also impose a new 15 percent tax on the revenues of Boston-based DraftKings and other companies.
The tax, aimed at revenue the companies receive from players in Massachusetts, would be among the highest in the nation for the young industry. Under current law, companies don’t pay a specific tax on revenues from their games.
The industry has been operating in Massachusetts since 2016 under a law that is scheduled to expire this summer. A state panel last summer recommended permanently legalizing and taxing the games, but it did not settle on an amount.
Senator Eileen M. Donoghue, the Lowell Democrat who was a cochair of the state commission, introduced a bill last week that would set the tax rate at 15 percent, close to rates in Pennsylvania, New York, and Delaware, but higher than in many other states.
The proposal would also classify daily fantasy sports, in which fans win cash prizes based on the performance of the roster of real-life athletes they select, as a legal form of online gambling.
DraftKings and other companies have resisted this designation as they seek to avoid running afoul of gaming laws and regulations at the federal level and in other states.
DraftKings declined to comment on details of the bill, issuing a brief statement that said it is “committed to working collaboratively with the legislature to adopt common sense fantasy sports legislation which protects consumers and allows our industry to continue to grow and create jobs here in Massachusetts.”
The legislative action comes as DraftKings solidifies its position as the industry leader, surpassing longtime rival FanDuel during the crucial NFL season following a failed merger of the two companies.
DraftKings said this month that it plans to add hundreds of workers in Boston and move from its downtown headquarters to a larger space in the Back Bay .
But the coming debate highlights the unsteady conditions that DraftKings and its competitors have weathered as they built their businesses.
The games exploded in popularity in 2015, as DraftKings and FanDuel amassed big audiences with expensive advertising blitzes. But they soon ran into regulatory and legislative battles across the nation.
Under Donoghue’s proposal, as under current law, the games would have to follow regulations adopted by Attorney General Maura Healey that ban players under 21, prohibit games that are based on college sports, and impose other consumer protections.
Donoghue said that her proposed legislation could help put to rest any lingering questions about the legality of daily fantasy sports, “once and for all.”