Early Innings for Fantasy Sports
The legality of fantasy sports contests that require an entry fee, and that pay out cash prizes, vary state by state, and can be considered illegal gambling under certain circumstances and in certain jurisdictions. Notwithstanding the foregoing, there is an exemption under federal law (the 2006 Unlawful Internet Gambling Enforcement Act (“UIGEA”) to be exact) for fantasy sports games that are set up based on the criteria that are sanctioned under UIGEA.
Generally, paid fantasy sports contests that track the requirements of UIGEA and that last an entire (or almost an entire) season are permissible in most states because they are deemed to require a sufficient level of skill. However, what has been less clear from a legal perspective is the question of 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.
Put Me in Coach
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 question remains unresolved.
This past March, however, daily fantasy sports contests seemingly received the backing of erstwhile critic, Major League Baseball. As recently as last March, top ranking executives at Major League Baseball likened daily fantasy sports contests to gambling activity, similar to flipping a coin. Now, MLB has actually 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.
According to Nigel Eccles, one of the founders of industry leading FanDuel, other professional leagues, such as the NFL and NBA, have also been quietly supportive of fantasy sports in general, including daily contests, recognizing these games as important drivers of fan interest in their respective offerings.
Enter Sandman?
While the major sports leagues may be warming up to short term fantasy sports contests involving entry fees and cash prizes, their imprimatur does not ensure that such games will be deemed legal by applicable governmental authorities. Nevertheless, having such powerful and visible advocates won’t hurt the cause.
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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