The rocketing visibility of daily fantasy sports, while it can be annoying, has been great for the growth of the pastime. As more people become aware of DFS, fantasy sites increase their offering, competition expands, and we generally just have a grand old time. One problem with ever-increasing exposure, though, is that those who don’t like gambling and DFS are now conscious of it.
Enter Massachusetts Attorney General Maura Healey, who told The Patriot Ledger that she is not so sure that DFS leader DraftKings, which is based in Boston, is a totally legal endeavor.
“The point is this: This is a new industry. It’s something that we’re reviewing, and we’ll learn more about it,” she said.
UIGEA Hurt Poker, Legalized Fantasy Sports
On a federal level, fantasy sports do appear to be totally legal. Though the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) forbade the flow of money to and from “illegal” online gambling sites, fantasy sports received a carve-out. As long as the results of the contests are not based on the play of real teams and meet the following criteria, they are allowed:
1. All prizes and awards offered to winning participants are established and made known to the participants in advance of the game or contest and their value is not determined by the number of participants or the amount of any fees paid by those participants.
2. All 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.
3. No winning outcome is based
a. on the score, point-spread, or any performance or performances of any single real-world team or any combination of such teams; or
b. solely on any single performance of an individual athlete in any single real-world sporting or other event.
Points (2) and (3) are fairly straightforward. Point (1) could be argued, but GPPs establish the prizes before anyone enters and though cash games like 50/50s and Heads-Up matches do rely on the buy-in to determine the prizes, all prizes are known ahead of time and the value of the prize does not change based on the number of participants (in fact, if the cash game contests don’t fill, they generally don’t even run).
States, though, can make fantasy sports illegal, and a few have. Massachusetts does not seem to have any law that explicitly deems DFS illegal, but as Healey said, she is reviewing things. One could possibly interpret Chapter 271, Section 16A of the state’s legal code as saying a business such as DraftKings is illegal, but it’s very murky (emphasis added):
Whoever knowingly organizes, supervises, manages or finances at least four persons so that such persons may provide facilities or services or assist in the provision of facilities or services for the conduct of illegal lotteries, or for the illegal registration of bets or the illegal buying or selling of pools upon the result of a trial or contest of skill, speed or endurance of man, beast, bird or machine, or upon the happening of any event, or upon the result of a game, competition, political nomination, appointment or election, or whoever knowingly receives from at least four such persons compensation or payment in any form as a return from such lotteries, such registration or such buying or selling shall be punished by imprisonment in the state prison for not more than fifteen years or by a fine of not more than ten thousand dollars, or by both such fine and imprisonment.
As you can see, it’s not clear that DFS would be considered “illegal” in this sense and, while I am nowhere close to being a lawyer, I would be shocked if one could reasonably say, “Yup, there it is. Fantasy sports are CLEARLY illegal.” If anyone reading this article can point to anything else relevant in Massachusetts law, feel free to comment. If I am way off, be gentle.
Others Questioning Fantasy Sports
The desire to review the legality of fantasy sports is an unfortunate growing trend. In July, Nevada Gaming Control chairman AG Burnett said he was beginning a legal analysis of fantasy sports. That’s not necessarily a bad thing as a) Nevada is clearly pro-gambling, b) he said he welcomed input from DFS operators, and c) he might say fantasy sports are perfectly legal.
Rick Kalm, director of the Michigan Gaming Control Board, recently said that he believes fantasy sports are “illegal under current Michigan law,” even though the law does not specifically state as much. Nevertheless, Amaya Gaming decided not to offer DFS through its site StarsDraft to people in Michigan.
On the national level New Jersey Congressman Frank Pallone, Jr. published a press release this week, saying that he has requested the House Energy and Commerce Committee, of which he is the Ranking Member, hold a hearing to review the legality of fantasy sports. He desperately wants sports betting legalized in New Jersey, so he might not actually be against fantasy sports, but rather upset that they are legal and sports betting in his state is not.