Massachusetts Avoids Taxing Fantasy Sports Industry (For Now)

Disagreements at the Massachusetts Statehouse may have weakened the state’s pitch to Amazon, but they also provided a tax break to a growing hometown employer. 

The legislative bodies of the Massachusetts General Court couldn’t reach an agreement on how to regulate the fantasy sports industry by the end of the legislative session, meaning state taxes will not be imposed on companies like Boston-based DraftKings. States like New York levy taxes as high as 15% on the gross revenue fantasy sports companies generate within state lines. 

Had it passed, the Massachusetts proposal considered by the House and Senate would have taxed the companies at 15% and was expected to generate over $2M in revenue in 2019, the Boston Globe reports. Lawmakers instead followed the recommendation of Gov. Charlie Baker to grant permanent legal status to fantasy sports companies but delay any taxes. A temporary legal status granted to the industry in 2016 was set to expire. 

DraftKings, which is moving into a 100K SF headquarters in Back Bay, had led a lobbying effort for legal recognition. The company has also pushed against calls for the Massachusetts Gaming Commission to regulate its operations like the regulatory body does with casinos and horse racing. By comparison, casinos in Massachusetts are taxed at 25% of gross revenue.

A legislative committee had conducted a two-year study and recommended taxing the industry, and now politicians speculate they missed an opportunity to get funds for projects across the state. 

“This wasn’t going to be a game-changer by any means, but we thought it was sensible to include a modest tax rate that wouldn’t stifle innovation but would still contribute to overall state funding,” Sen. Brendan Crighton (D-Lynn) told the Globe.