It’s the most wonderful time of the year. No, not the winter holidays; the beginning of football season. With it comes the return of fantasy football, which is the most popular of all fantasy sports. The fantasy sports industry as a whole has grown at an incredibly rapid rate: according to the Fantasy Sports Trade Association, 56.8 million people in the USA and Canada played fantasy sports in 2015, which was double the number of people that played in 2009.[1] Some sources have estimated that nearly 75 million people around the globe will play fantasy football during the 2016-17 season, injecting roughly $4.6 billion into the economy.[2]
For those who may be unaware, fantasy sports leagues typically consist of anywhere from eight to a dozen or so teams that are “managed” by players. The season starts with a draft, where each player drafts a full roster’s worth of athletes. The players then manage their teams for the entire sport’s season, deciding who to play and who to bench on their team each week during head-to-head matchups against other teams in the league. Much like real sports, the objective is to outscore your opponent’s team each week. Players in season-long leagues may or may not be playing for money; it differs from league to league.
Daily fantasy sports (“DFS”) leagues are a relatively new development in the industry, and have been a hot button topic over the past year or so. Whereas season-long leagues are a large investment of time and effort for players, DFS leagues (as implied by their name) only last for one day. There are a handful of websites that host DFS leagues where players, upon payment of an entry fee, can draft a team and compete in a variety of matches or tournaments for the day. Players can win hundreds, thousands, or even potentially millions of dollars in a single day depending on a number of factors (i.e., what match or tournaments they entered, how their team fared as compared to the rest of the competition, etc.).
Beginning in roughly the fall of 2015, the legality of DFS leagues came under scrutiny in a number of states. Season-long fantasy sports leagues are generally considered to be a game of “skill” (and thus do not qualify as gambling) because players manage their teams and adjust their lineups across an entire season, which requires players to pay close attention to statistics, trends, etc. In contrast, some states took the position that DFS players are more or less betting on the performance of individual athletes during an isolated game, which they categorized as more of a game of “chance.” As such, during the 2015-16 season a number of state Attorneys Generals took the position that DFS leagues were a form of illegal gambling. As a result, DFS companies and their players were potentially subjected to criminal prosecution in those states. Not to be silenced, DFS lobbyists and players pushed back through the political process, which resulted in a number of states passing special legislation declaring DFS legal.
So, is DFS legal today? The answer to that depends on where you live. Under federal law, DFS leagues are not illegal.[3] At the state level, subject to certain restrictions, DFS has been made either expressly legal by legislation or is presumably legal per Attorney General opinions in: Colorado; Indiana; Kansas; Maryland; Mississippi; Missouri; New York; Rhode Island; Tennessee; West Virginia; and Virginia. On the other hand, DFS is either expressly illegal by legislation or is presumably illegal per Attorney General opinions in: Alabama; Arizona; Delaware; Georgia; Hawaii; Idaho; Illinois; Iowa; Louisiana; Montana; Nevada; Texas; Vermont; and Washington. The legality of DFS is still in somewhat of a gray area in the remaining states (including Maine), which have not really taken a stance one way or the other to date. However, 13 states currently have proposed legislation pending which would make DFS expressly legal by statute, so the trend seems to be moving in that direction.
Given that the legal landscape on this issue is in a state of flux, you would probably be well served to research the laws in your home state and/or speak to an attorney if you are interested in (or are currently engaged in) playing in a DFS league.
Disclaimer
These materials have been prepared by Rudman Winchell for educational purposes only. They should not be considered legal advice. The transmission of this information to you is not intended to create a lawyer-client relationship. Readers should not act upon this information without seeking professional counsel. You should not send any confidential or private information to Rudman Winchell until a formal attorney-client relationship has been established, in writing.
[1] https://fsta.org/research/industry-demographics/.
[2] https://nypost.com/2015/09/05/nearly-75m-people-will-play-fantasy-football-this-year/.
[3] See 31 U.S.C. § 5362(1)(E)(ix).
