Daily Fantasy Sports Games in the USA?
As discussed numerous times on this site, the legality of fantasy sports contests that require an entry fee, and that pay out cash prizes, varies state by state, and can be considered illegal gambling under certain circumstances, depending on the jurisdiction.
While there is an exemption under federal law and the laws of several states for season-long fantasy sports games that adhere to certain defined criteria, there remains a question about whether or not the short-term, or “daily,” fantasy sports games involve enough skill, as opposed to luck, in order to pass muster under applicable state and federal law.
The Daily Gold Rush
In 2012, a lawsuit, Langone v. Kaiser & Fan Duel (as discussed here and here), challenged the legality of short-term or “daily” fantasy sports contests. While that suit was ultimately dismissed on procedural grounds, the underlying legal issue remains unresolved.
Nevertheless, big name players have been flocking to the daily fantasy sports marketplace recently – an indicator of which way the smart money is betting in terms of resolution of the underlying legal controversy.
According to Advertising Age:
“On Tuesday, USA Today plans to introduce Fantasy Score, a fantasy sports gaming site focused on daily tournament-style games, and to rebrand its longtime fantasy news wire KFFL as USA Today Fantasy Sports.”
With this rollout, USA Today now joins Sports Illustrated, which recently launched a fantasy sports mobile app, called Fan Nation, which features daily fantasy sports contests that charge entry fees and pay out prizes.
In addition, this past March, Major League Baseball teamed up with the industry’s second largest venue, DraftKings, to offer an officially sponsored MLB daily fantasy sports contest. While the contest that is being cross-promoted by Major League Baseball and DraftKings is free to enter, DraftKings offers multiple pay-to-enter short term contests as well, and Major League Baseball doesn’t appear put-off by teaming up with DraftKings despite its pay-to-play offerings.
Wall Street has been taking notice as well. Recent reports by Bloomberg attest to the massive spike of investment that daily fantasy sports venues have received over the past year or two.
After the Rush?
While big names in publishing, professional sports and Wall Street are staking-out territory in the daily fantasy sports arena, their increased participation does not ensure that such games will be deemed legal by applicable governmental authorities. Nevertheless, the momentum is strongly in favor of the backers of daily fantasy sports.
The interplay of business interests with 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.
This blog post touches on only a few of the relevant legal issues involved in the fantasy sports arena. If you plan on engaging in, or operating, a fantasy sports venture, you should retain competent legal counsel to help you design the contests in a way that comports with applicable law.
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.
The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.
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