Looking for the Rulebook
The rules pertaining to fantasy sports contests that require an entry fee, and that pay out cash prizes, vary by jurisdiction, and the legality of such fantasy sports contests is often determined by various 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 meet certain criteria. However, while some state laws, including one recently passed in Maryland, are consistent with the UIGEA carve-out, other states do not permit fantasy sports contests the free rein they would otherwise enjoy under UIGEA.
Avoiding Rookie Mistakes
While there is currently much legal wrangling, and uncertainty, surrounding issues related to the duration of fantasy sports contests played for money, there are a couple of basic rules that must be adhered to despite the foregoing.
First, for a fantasy contest to be legal, the outcome of the contest must be determined by the statistics generated by multiple athletes (not all on the same team) participating in multiple real-world sporting events. So, at the very least, fantasy sports contests should require players to assemble a roster consisting of several athletes, from more than one team and participating in more than one game.
Second, the prizes offered to the winners must not be influenced by the amount of fees paid by the contestants, or the number of contestants in a given fantasy contest. While it might be tempting as an operator of a pay-for-play fantasy sports contest to treat the purse for each contest like a pot at a poker table – the more players that enter a game and pay a fee, the greater the pot grows – such a scenario would be in violation of applicable law. Instead, fantasy sports contest operators must pick a prize amount prior to the commencement of the particular contest, and not modify that amount based on the number of players participating in the fantasy contest, or amount paid in entry fees.
It Ain’t Over ’Till It’s Over
In many states, and on the federal level, the legality of fantasy sports games that are played for money remains unclear and in a state of flux. 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 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, 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.
Attorney Advertising
