Fantasy Football Regulation — Coming to a State Near You?

    Fantasy Football Regulation—Coming to a State Near You?

    After New York State Attorney General, Eric T. Schneiderman served fantasy sports websites FanDuel and DraftKings with cease-and-desist orders, it appears that other states may soon follow suit.

    If you have watched television for any length of time during the last year, you know that FanDuel and DraftKings are multi-billion-dollar “daily fantasy sports” or “DFS” companies. Schneiderman contends that for-pay DFS platforms are considered illegal gambling under New York state law.

    Not coincidentally, Schneiderman’s investigations began after a DraftKings employee allegedly accessed internal betting data garnered from his employer to win $350,000 from a rival—essentially using “inside’ information, that is, information not known or available to other participants.

    Under New York law, “a person engages [in illicit gambling activities] 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”. (Emphasis added.)  DFS companies argue that because they are placing bets on events outside of their control or influence, (i.e. the in-game performances of professional athletes), such activity does not fall within the ambit of New York’s anti-gambling statute.)  However, depending on the source, there seems to be no agreement whether DFS activities are skill based or games of chance.  Regulators likely fall into the “game of chance” category, while players and DFS companies fall into the “game of skill” circle.

    [As an aside, in 2006, the Unlawful Internet Gambling Enforcement Act (the “Gambling Act”) was enacted into law after it was signed by President George W. Bush.   This act was designed to prevent unlicensed gambling over the internet, but specifically excluded fantasy sports.]

    The New York action caught the eyes of other state regulators.  Nevada has an outright ban on on DFS activities (perhaps because Nevada would like to take DFS activities under its control).  According to USA Today, DFS customers will spend 3 Billion Dollars on such activities this year alone.  Of course, most states would be more than willing to share in that revenue.

    SOURCES:

    http://www.nytimes.com/2015/11/11/sports/football/draftkings-fanduel-new-york-attorney-general-tells-fantasy-sites-to-stop-taking-bets-in-new-york.html?_r=1

    http://www.nytimes.com/interactive/2015/11/10/sports/document-final-nyag-fanduel-letter-11-10-2015-signed.html

    http://www.usatoday.com/story/sports/fantasy/2015/12/02/pew-stateline-state-regulation-daily-fantasy-sports-fanduel-draftkings/76660516/

    Posted by: Gustafson Nicolai pc – Adam Nicolai, Esq. and Ryan Gustafson, Esq., October 16, 2015

    Contributing: Diana Nguyen and Andrew Cernak