The short answer to the question posed in the title is, “it depends on the jurisdiction and the features of the fantasy sports game.”
In terms of federal law, the 2006 Unlawful Internet Gambling Enforcement Act (“UIGEA”) created a specific carve out for fantasy sports games that meet certain criteria. In order to fall within UIGEA’s exception provisions, the fantasy sports game must: (a) have an outcome that reflects the relative knowledge of the participants, but not chance (more on this below); (b) is determined predominantly by accumulated statistical results of multiple athletes participating in multiple real-world sporting events; and (c) offer prizes that are not influenced by the amount of fees paid by, or the number of, participants.
Some state laws, including one recently passed in Maryland, follow UIGEA’s lead in setting up the requisite criteria to determine legality. Other state attorneys general, such as in Florida and Louisiana, have issued specific opinions as to the illegality of fantasy sports contests played for money.
However, in those states where there is no specific legislation authorizing fantasy sports contests played for money, their legality depends on the state’s interpretation of the degree of “chance” vs. “relative knowledge” or “skill” involved in fantasy sports in general, and the games at issue in particular. If a state takes an expansive view of the influence of chance on a given fantasy game, the more likely that the state is to view the particular fantasy sports game as an illegal form of gambling. Even then, some states don’t allow pure games of skill to be played for cash prizes.
The duration of the fantasy sports game may also impact a given state court’s interpretation of its legality. In 2012, a little heralded lawsuit, Langone v. Kaiser & Fan Duel, was filed that might result in a landmark ruling for short term or “daily” fantasy sports contests. The issue that Langone may decide is whether daily fantasy sports contests involve a sufficient level of skill and knowledge, rather than chance, to satisfy the legal requirements of UIGEA and applicable state laws. While there is a general consensus that longer duration fantasy sports games that last for approximately a full season involve such levels of skill and knowledge, no court has directly addressed whether the much shorter duration daily fantasy sports games meet this test.
Thus, the particular features of a fantasy sports contest – and the states in which prospective contestants reside in – are essential to the initial determination of whether or not a fantasy sports contest with cash prizes is legal. The evolution of federal and state interpretations of fantasy sports gaming remains a significant topic for all gaming attorneys, fantasy sports lawyers and those interested in fantasy sports law in general.
If you are interested in learning more about this topic or pursuing a venture in this area, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.
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