As our readers are aware, the legality of fantasy sports contests is determined by two things: 1) the laws of the individual states in which the participants are located; and 2) the rules and features of the contests themselves.
In terms of federal law, the 2006 Unlawful Internet Gambling Enforcement Act (“UIGEA”) created a specific carve out for fantasy sports games that left the legality of fantasy sports up to the states. As we have detailed on this blog, some states have decided to allow its citizens to participate in fantasy sports contests, while others are silent on the topic or have outlawed such contests entirely. Kansas appears to have become the latest state to outlaw fantasy sports contests within its borders.
The Legality of Fantasy Sports Contests in Kansas
In a recent update to its website, the Kansas Racing and Gaming Commission (“KRGC”) states that “if a fantasy sports league involves the elements of (1) prize, (2) consideration and (3) chance, then it is an illegal “lottery” prohibited by Kansas criminal law.”
The first and second elements listed by the KRGC are pretty straightforward: 1) a fantasy sports prize may consist of cash, gift certificates or tangible goods awarded to the fantasy sports contest winner(s); and 2) consideration is a buy-in amount or fee paid by the player to participate in the fantasy sports contest. It is the element of chance outlined by the KRGC that has caused uncertainty in the fantasy sports industry.
Under Kansas law, the element of chance, as it relates to fantasy sports, is satisfied if it predominates over any skill involved. The KRGC acknowledges that some level of skill is required to be a successful fantasy sports player. It is whether that level of skill predominates over the amount of chance involved that has been the subject of significant legal wrangling. However, the KRGC has now definitively ruled that “chance predominates over skill in fantasy sports leagues.”
In short, under Kansas State law, if a fantasy sports league requires players to pay a fee to participate and awards a prize to the winner(s), in the opinion of the KRGC, it is an illegal lottery, punishable under Kansas criminal law.
This blog post only touches on 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, be sure to retain competent legal counsel to help you design your associated contests in a way that comports with applicable law, and best protects you and your business.
If you are interested in learning more about this topic or pursuing a venture in this area, please e-mail us atinfo@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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