Lawsuit Has the Potential to Provide a Landmark Ruling for Fantasy Sports

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In 2012, a little heralded lawsuit, Langone v. Kaiser & Fan Duel, was filed.  In this case, the plaintiff is seeking to recover third-party losses from the website Fan Duel in connection with daily fantasy sports contests run on the Fan Duel website.  At issue is the legality of daily – or other short term – fantasy sports contests that are played for money, as well as the potential culpability of operators of websites featuring such limited duration fantasy sports contests.

Certain variations of fantasy sports have been treated as exempt under applicable federal and state laws – in particular, on the federal level, the 2006 Unlawful Internet Gambling Enforcement Act (“UIGEA”) created a carve out for games that met certain criteria.  Namely, in order to fall within UIGEA’s exception provisions, the fantasy sports games must: (a) have an outcome that reflects the relative knowledge of the participants (but not chance); (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.

Many state laws, including one recently passed in Maryland, follow UIGEA’s lead in setting up the requisite criteria to determine legality. 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 in UIGEA and applicable state laws.  While there is a 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 in duration daily fantasy sports games meet this test.

Thus, the outcome in Langone could establish a broad legal standard that could impact a daily fantasy sports industry that boasts nearly $5 Billion in annual revenue.  A hearing on a motion to dismiss is set for March 11, 2013.  While we remain confident that the defendant will prevail, the outcome of that hearing, and the ultimate decision in this case, will be of utmost interest to 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 feel free to contact us.

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