legality of fantasy sports games

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Are Daily Fantasy Sports Games Legal?Warsaw Sports Marketing Center Undergraduate Program Manager / Instructor Mini-Lecture

Joshua Gordon, JD, MA

February 1, 2006 letter addressed to Members of Congress and written by then-General Counsels of the NFL, MLB, NBA and NCAA as well as the then-Deputy Commissioner of the NHL. That letter asked Congress to pass the UIGEA in order to preserve the integrity of our respective sports. It further stated, [a]llowing rampant sports gambling can cause a cynical and suspicious perception of athletic events, in place of the traditional American values they should represent. Near its conclusion, the letter reads, [t]he Unlawful Internet Gambling Enforcement Act does not change the law with respect to what is currently legal and illegal, but it adds important and workable enforcement tools that will prevent . . . illegal Internet gambling transactions even when the websites are operated offshore.UIGEA

Think Rotisserie League Baseball!!!2

31 USC 5361 Unlawful Internet Gambling Enforcement Act (UIGEA) explicitly states that it shall be considered unlawful internet gambling when a person stakes or risks something of value upon the outcome of a sporting event. Critical exclusions include participation in any fantasy sports game.

Fantasy sports games must:

prohibit participants from controlling fantasy teams of only athletes from one professional or amateur organization;inform participants of all prizes and awards in advance of the fantasy games;establish all prizes and awards in advance of the fantasy games;refrain from tying the value of prizes and awards to the number of participants or the amount of fees paid by the participantsrefrain from tying the outcome of the fantasy sports games to the score, point-spread or performances of any single real-world team or combination of teams; andrefrain from tying the outcome to being solely based on a single performance of an individual athlete in any single real-world sporting or other event.The six aforementioned parameters are precise, concise and largely lack overbreadth or vagueness. However, there remains one additional requirement, which by its nature leaves the entire analysis open to interpretation.


Section 1(E)(ix)(II) of the UIGEA requires that [a]ll winning outcomes reflect the relative knowledge and skill of the participants and are determined predominantly by accumulated statistical results of the performance of individuals (athletes in the case of sports events) in multiple real-world sporting or other events.

Hundreds of millions of dollars in venture capitalDraftKings & FanDuelInvestors include NBC Sports, Time Warner, ESPN, Disney, NBA, MLB, Comcast, Robert Kraft, Jerry JonesDraftKings valuation at roughly $1B28/32 NFL teams have advertising deals with with one of the two DFS leaders (AdWeek 10/7/15)

MLB and MLBPA prohibits its players from participating in playing fantasy sports for any type of prize (Rule 21 of CBA)

In a report released in early April 2015, Star Fantasy Leagues in conjunction with Gaming Laboratories International revealed that a skilled player won roughly 70% of the time in Star Fantasy Leagues daily fantasy sports salary cap competitions over the course of an NFL season.

On an Opening Day game between the Washington Nationals and New York Mets, MLB Commissioner Rob Manfred provided his position on sports gambling and fantasy sports. The difference is ones legal and one is not, said Manfred. Its a pretty definitive line.

DraftKings employee Ethan Haskell reportedly won $350,000 on a $25 bet on FanDuel, resulting in accusations that Haskell had, in effect, engaged in insider trading from a data leak around certain NFL stats and lineups.


started as investigation into employee misconduct and use of proprietary information and shifted to review of operations and business model8

Source: WSJ 10/16/2015

11/9/15 NY AG Eric Schneiderman Cease and Desist letter saying games constituted illegal gambling under state law a person engages in gambling when he stakes or risks something of value upon the outcome of a contest of chance or a future contingent event not under his control or influence.

Daily Fantasy Sports are creating the same public health and economic concerns as other forms of gambling, including addiction. Finally, FanDuels advertisements seriously mislead New York citizens about their prospects of winning.

Certain structural aspects of DFS make it especially dangerous, including the quick rate of play, the large jackpots, and the false perception that it is eminently winnable.

The state laws prevent residents of Montana, Louisiana, Washington, Iowa, Nevada, and Arizona from playing daily fantasy games on and is virtually identical to DraftKings & FanDuel in terms of state eligibility; the only difference at this time is that Yahoo also prevents Florida residents from playing.


DraftKings Millionaires Commercial

FanDuel anybody can play, anybody can succeed

$100 Million on TV ads in September

How DFS differs from traditional fantasy sports? (NY AG argument)

Traditional Fantasy Sportstraditional conduct a competitive draftcompete over the course of a long seasonrepeatedly adjust their teamsplay for bragging rights or side wagershost sites receive most of their revenue from administrative fees and advertising

DFSsites hosting DFS are in active and full control of the wageringset prizes, control relevant variables, and profit directly from the wageringdesigned for instant gratification, stressing easy game play and no long-term strategy

Closer to poker? a small number of professional gamblers profit at the expense of casual players top 1% of FanDuels winners receive the vast majority of the winnings

According to documents attached to Schneidermans lawsuit, the company collected $25.67 million in entry fees from the state in 2014, and after paying out prizes it had $2.58 million in revenue there. Thats more than in any other state except California, where DraftKings had $3.45 million in revenue, according to the document. Those figures are expected to be much larger this year.

Schneiderman also referenced messages DraftKings chief executive Jason Robins posted on the forum several years ago in which he suggested DraftKings operates in the gambling space and said the companys revenue model is identical to a casino[s].13


Is DFS legal?

What is the future of DFS?

Other thoughts?



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