There are conflicting arguments over whether paid daily fantasy sports games constitute
gambling, due to its mixture of
chance-based and
skill-based elements. In an "
IAmA" thread on
Reddit, DraftKings CEO Jason Robins described the service as being "almost identical to a
casino", described the concept of DFS as a cross between fantasy sports and
online poker, and repeatedly referred to the service using gambling-oriented terms such as "wager" and "betting". DraftKings and FanDuel have also entered into affiliation and sponsorship agreements with gambling-oriented entities; DraftKings sponsored the
2015 Belmont Stakes and the
World Series of Poker, while FanDuel has affiliated with websites related to sports betting. Writing for
The New York Times Magazine,
Jay Caspian Kang argued that DFS games themselves were "not inherently crooked", explaining that "most of the benefits praised by its enthusiasts — the ease of play, the camaraderie among fans, the challenge of solving what amounts to a math puzzle — are real. It does take skill to parse game film, diligently follow the news and interpret the thousands of bits of sports information that are generated each night. If a problem gambler at the poker rooms I frequent in New York City were to hire a programmer and flood the D.F.S. market with his lineups, he would almost certainly hemorrhage money." Each state applies varying standards in regards to determining whether a game is one of skill, or of chance; in most states, this determination is based on whether the skill-based elements of the game are predominant over those of chance, and whether these chance-based elements have more than an incidental effect on the outcome of the game (
dominant factor test, material degree). Applying the predominance test, the
Supreme Court of Illinois ruled that participants in daily fantasy contests are "actual contestants in the bona fide contest for the determination of skill" and do not violate Illinois' prohibition on gambling. The court disagreed with an
Illinois Attorney General Opinion that interpreted "actual contestants" to mean the persons in
the athletic contest. In 2015, the Canadian Gaming Association commissioned an opinion on the legality of DFS in Canada from former
Alcohol and Gaming Commission of Ontario general counsel Don Bourgeois. He determined that DFS would likely be classified as a game of chance under Canadian law, going on to say in an interview that under the
Criminal Code of Canada, games that mix chance- and skill-based elements are considered games of chance. However, Canadian authorities have not yet targeted DFS services; historically, the government has only targeted illegal gambling operations that have a presence within the country. While the service
Sport Select offers legal sports wagering games through Canada's
lotteries, it is subject to a legal prohibition on wagering on individual sporting events.
UIGEA carve-out The UIGEA has frequently been cited as having exempted daily fantasy games from being considered gambling, as the law does not consider an online contest with pre-determined prizes, and an outcome based on skill that is "determined predominantly by accumulated statistical results of sporting events, including any non-participant's individual performances in such sporting events", to be unlawful wagering. The carve-out was based on the language of an amendment proposed by Senator
Richard Bryan to the failed
Internet Gambling Prohibition Act. The act itself does not define unlawful internet wagering, and expressly refrains from altering the legality of any underlying conduct other than funds transfers, meaning that state law remains binding. It also depends on banks to act as enforcers of the prohibitions. Congressman
Jim Leach, who authored the UIGEA, explained that the fantasy sports carve-out was meant to relieve the burden of enforcement of the act by banks, nor cover the present-day daily fantasy industry, and that "it is sheer chutzpah for a fantasy sports company to cite the law as a legal basis for existing".
Self-imposed restrictions Daily fantasy services have historically blocked residents of Arizona, Iowa, Louisiana, Montana and Washington from participating in paid games, under a presumption that DFS is illegal in these states due to the strictness of their gambling laws. These reports led to regulatory probes by investigators in the aforementioned states. Both websites have since implemented measures to block proxy users. On October 15, 2015, the
Nevada Gaming Control Board published a memorandum ruling that daily fantasy sports games were a form of sports wagering, and that DFS services must cease serving customers in the state of Nevada until they obtain a sports pool license. The Board felt that DFS fell under the state's definitions of a "gambling game" and a "sports pool", as they "[accept] wagers on sporting events or other events by any system or method of wagering", including wagers on events occurring during a sporting event (
props), combinations of multiple events occurring within an event (
parlays), and against the performance of other players, with "rake-offs" taken by the operator on each wager (defined as a "percentage game" under Nevada law). Prior to the ruling, it was also reported that Gary Grief, executive director of the
Texas Lottery, had been investigating ways of integrating DFS into the state lottery system, including attempts to pursue DraftKings as a partner for a proposed game which would have offered credit for the service as prizes. FanDuel ceased serving residents of Texas, but DraftKings filed a request for declaratory judgment on March 4, 2016, seeking clarification on the matter. On January 27, 2016, at the request of Senator
Rosalyn Baker,
Attorney General of Hawaii Doug Chin issued an opinion that DFS could be illegal under
Hawaii law, as it involves a wager on an event outside of the player's control. He explained that "the technology may have changed, but the vice has not." On April 5, 2016,
Attorney General of Alabama Luther Strange ruled that DFS was illegal under state law, and sent cease and desist notices to DraftKings and FanDuel ordering them to stop serving residents of Alabama by May 1, 2016. He argued that while picking players for a fantasy team is an activity of skill, player performance can vary, and Alabama law dictates that it is illegal to risk something of value on any game with an element of chance.
Legalization In September 2015, the state of
Massachusetts tabled a bill exploring the possibility of allowing the
Massachusetts Lottery to run online, skill-based games, such as daily fantasy sports. On November 19, 2015, the government announced that it would allow daily fantasy sports services to operate within Massachusetts under proposed regulations, including the requirement for all players to be 21 and over, banning members of the professional sports industry from playing the games (including athletes), and banning the marketing of the services in colleges and high schools. On March 7, 2016, the state of
Virginia passed legislation regulating "fantasy contests", defined as skill-based games with cash prizes that are based on the "accumulated statistical results of the performance of individuals"; the law makes no reference to sports or DFS. Services must pay a $50,000 registration fee, be restricted to those who are 18 and older, and be subject to yearly independent audits. The law was criticized for being broadly-worded, with critics believing that it could feasibly apply to season-length games or any similar activities, and that the required licensing fee adds a financial barrier for doing business in the state. On May 10, 2016, it was reported that the U.S. House Subcommittee on Commerce, Manufacturing and Trade was planning to discuss the legal aspects of DFS in a hearing. In August 2016, New York became the largest state to legalize daily fantasy sports. Nearby New Jersey and Pennsylvania each followed suit in mid-2017. By the end of 2017, 18 different states had legalized paid-entry fantasy sports contests. Governor
John Kasich of
Ohio signed a bill in late December making Ohio the eighteenth.
New York ruling and lawsuit On November 10, 2015, Attorney General of New York State Eric Schneiderman issued a cease-and-desist order to DraftKings and FanDuel, arguing that DFS was illegal under state law (which specifies that games where players "risk something of value" and do not have "control or influence" over the outcome, are gambling), On November 16, the two services tried to request a temporary
restraining order to prevent Schneiderman from enforcing the cease-and-desist, but a state judge declared their request to be premature. Following the hearing, a spokesperson for the Attorney General declared that he could file a formal lawsuit against the two sites "as soon as tomorrow". The same day, state senator
Michael Ranzenhofer introduced a bill that would explicitly classify daily fantasy sports as a game of skill. On November 17, 2015, the Attorney General filed a request for a temporary injunction to force DraftKings and FanDuel to cease serving customers in the state of New York. In the filing, Schneiderman argued that DFS was merely a "re-branding" of sports betting, and in response to claims that DFS constitutes a game of skill, he argued that "a few good players in a
poker tournament may rise to the top based on their skill; but the game is still gambling." Schneiderman also acknowledged that the two services had "basic compliance issues" (alluding to the inside information scandal), had associated themselves with gambling-oriented entities, and that DraftKings had accepted entry fees from users in states where it argued that DFS was illegal. The Attorney General also issued a
subpoena for information from
Yahoo! in regards to its own daily fantasy offerings. During hearings on November 25, 2015, Judge Manuel J. Mendez disputed assertions by the services that a player's choice of athletes represents "control or influence" over the outcome, stating that players are ultimately "relying on someone else's skill" to determine an outcome. Mandez argued that "the payment of an 'entry fee' as high as $10,600 on one or more contests daily could certainly be deemed risking 'something of value'." He also ruled that the UIGEA "has no corresponding authority under New York State law". However, Mandez granted a temporary stay following requests for an appeal. On December 31, 2015—prior to an
appeals court on whether they could continue to operate during the lawsuit, the Attorney General amended the lawsuit to demand that the two companies pay
restitution—including the return of all money collected from customers in New York State. Schneiderman also acknowledged the services' deceptive advertising practices, such as "convoluted" first deposit bonuses. On January 11, 2016, DraftKings' and FanDuel's stay was granted, meaning that they could continue to serve New York residents, pending the outcome of the appeal. However, later that month,
Vantiv announced that it would no longer provide its payment processing services to the DFS industry, and in early-February 2016,
Citigroup announced that it would no longer process payments for DraftKings and FanDuel made by residents of New York State, "pending a final decision by the courts". The
Boston Globe believed that a ruling on the legality of DFS in New York State would have industry-wide implications, as it is one of the largest markets for these services. On March 21, 2016, the Attorney General announced a partial settlement of its lawsuit, under which DraftKings and FanDuel agreed to cease offering paid games in the state of New York, and abide by the result of an upcoming appeals court hearing. The hearings, which would determine whether the services would have to pay restitution, were tentatively scheduled for September 2016—assuming that legislation legalizing daily fantasy sports was not passed by then. DraftKings and FanDuel spokespersons stated that the companies were working with local officials and supporting legislation to legalize DFS under state law. This settlement does not address the false advertising claims, which are still being pursued. The next day, Yahoo announced that it would voluntarily comply with the settlement and also cease offering paid games in the state of New York. On June 18, 2016, the New York State senate approved legislation to legalize daily fantasy sports. Daily fantasy providers will be required to pay 15.5% of their annual revenue to the
New York Lottery's education fund in order to serve customers in the state.
League policies The
NCAA considers all paid fantasy games—including daily fantasy—to fall under its prohibition of sports wagering by
student athletes, punishable by ineligibility to participate in NCAA-sanctioned athletics for one year. Advertising for daily fantasy services are also forbidden from being broadcast during telecasts of the NCAA's tournaments. In August 2015, the NCAA and a group of ten
conferences jointly campaigned against daily fantasy games featuring college sports, asserting that DFS is inconsistent with the NCAA's policies and values. The
SEC had discussions with its broadcast partners in an attempt to discourage the advertising of daily fantasy games during its telecasts, while both
Big Ten Network and
Pac-12 Network prohibited advertising for daily fantasy games involving college sports. On December 9, 2015, it was reported that ESPN had similarly agreed not to air advertising for daily fantasy services during telecasts of the
College Football Playoff. On March 31, 2016, DraftKings and FanDuel jointly agreed to stop offering daily fantasy college sports following the conclusion of the
2016 NCAA Men's Division I Basketball Tournament. The NFL does not outright ban participation in paid or daily fantasy sports games by its players and staff, but does restrict how much one may win in such games. The
PGA Tour previously prohibited its players from participation in paid DFS games involving golf, or endorsing DFS companies. In 2019, the PGA Tour changed its rules to allow players to endorse casinos and other legal gaming operators, but within the United States players cannot endorse a company whose "primary purpose" is sports betting. The new policy specifically cited DraftKings and FanDuel as examples of companies allowed under the new rules, and FanDuel would subsequently reach a sponsorship deal naming it the official sports betting operator of the PGA Tour. FanDuel's terms of service bans any athlete, coach, referee, or owner from entering contests for the sport in which they are involved with. Furthermore, DraftKings announced that CFL players were not allowed to enter any CFL contests shortly after announcing their partnership with the league. == See also ==