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Bill Virgin: A fantasy for more state revenue

The state of Washington needs more money. Check that — it wants more money.

But the state has a problem in getting more money. Check that — it has at least three problems. First, the easiest way to get more revenue, through a growing economy, doesn’t work if your economy isn’t growing, and there’s considerable debate about how much growth is left in the recovery, such as it is.

Second, everyone else wants more money, too, and taxpayers are feeling increasingly stressed about it. Counties, cities, school boards, port districts and dozens of other governmental entities are in competition to see who can grab whatever coins are left in the public’s purses and pockets before someone else gets to it.

Third, the state has limited options for adding additional sources of revenue. Oh sure, the governor wants a carbon tax, and being told “no” once probably won’t deter him from trying again. And certain segments of the political class get a dreamy, faraway look of longing in their eyes every time the notion of a state income tax is raised; Washington voters have historically not shared that sentiment.

But “limited” does not mean “none” when it comes to revenue-raising options, and the state has a few. One is to grab more money from out-of-state businesses, a move many states are making. Starting Sept. 1, for example, businesses outside the state must pay B&O tax if they make more than $267,000 in wholesale sales to Washington customers (based on 2014 sales), the Department of Revenue reports.

Here’s one other opportunity: Online fantasy sports leagues gambling.

Fantasy sports — using statistics from real-life teams and athletes — have been around for years, but now the big growth is in the online marketplace, making wagers and winning monetary prizes based on how well participants’ roster of players they’ve chosen for make-believe teams performs.

Some big money is moving into online fantasy-sports betting, and not just from the players themselves. FanDuel claims $363 million in funding. Yahoo recently boosted its presence in the segment. Such is the interest that online fantasy-sports betting has its own trade association.

Betting on made-up teams is becoming mainstream and big business. Oh, and by the way, it’s illegal in Washington.

“The U.S. government and 45 of the 50 states consider fantasy sports a game of skill,” says DraftKings, another of the big sites, in the “frequently asked questions” portion of its website. “We do not allow residents of Arizona, Iowa, Louisiana, Montana, or Washington to participate in our contests due to state-specific regulation against cash prize awards.”

You could hardly argue that Washington is a gambling-adverse state. Between the lottery, casinos, horse racing, bingo, card rooms and the like, you don’t have to go far to find an opportunity to lose money.

But to do so from the comfort of your own home is a tougher proposition. Washington’s rules on gambling are tightly written in the sense that they operate on the philosophy that everything is illegal unless it’s specifically permitted.

Online wagering isn’t. Neither is sports wagering, for that matter, except for something called the 100-square sports board (which has its own lengthy list of rules).

“The federal Unlawful Internet Gambling Enforcement Act (UIGEA) provides an exemption for fantasy sports,” says a backgrounder from the Washington State Gambling Commission. “However, the UIGEA also states it does not alter state law prohibiting fantasy sports wagering. Washington state does not allow online fantasy sports wagering and the UIGEA does not change this. Fantasy sports wagering falls under Washington state law’s definition of gambling — risking something of value on the outcome of a contest of chance or a future contingent event not under the person’s control or influence to receive something of value in the event of a certain outcome.”

The same report acknowledges that the state’s enforcement action is directed at those who run such games, not at the players. Still, you pay your money and you take your chances: “Players have no recourse if they are not paid or cheated.”

If public sentiment is an indicator, Washington may not continue to be a holdout on online fantasy-league betting. Susan Newer, rules coordinator and public information officer for the gambling commission, says online fantasy-league gambling is “what I’m getting the most questions on.”

In the last legislative session, two bills were introduced to define online fantasy-league betting as a game of skill, which would remove one of the three requirements (prize, consideration, chance) that makes a game gambling.

Neither bill went anywhere, but that could change in a hurry if that public sentiment is combined with a mechanism to rake in a share of the take (on both ends of the transaction, even better). That way, the next time the state Supremes pitch a fit over education funding, the Legislature can respond, “You want more cash? How’s your fantasy-league team doing?”

Bill Virgin is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at bill.virgin@yahoo.com.

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