As discussed numerous times on this site, the legality of fantasy sports contests that require an entry fee, and that pay out cash prizes, varies by state. Pay-to-play contests that offer prizes to winners can be considered illegal gambling under certain circumstances, depending on the jurisdiction.
There is currently an exemption under federal law, as well as the laws of several states, that permits season-long fantasy sports games that adhere to certain defined criteria. Such long-term games are considered games of skill and, thus, have garnered more favorable treatment under federal law, and the laws of those sympathetic states.
However, some argue that it is unclear whether or not the short-term, or “daily,” fantasy sports games involve enough skill, as opposed to elements of chance, in order to be considered legal under applicable state and federal law.
Contesting Daily Fantasy Sports Contests
An attorney in Illinois, Christopher Langone, was the first to prominently contest the legality of paid daily fantasy sports contests. In a 2012 lawsuit, Langone v. Kaiser & Fan Duel (as discussed here and here), Langone issued his first legal challenge. That suit, however, was dismissed on procedural grounds.
In March 2013, Langone filed another lawsuit in Illinois (Langone v. HeadChopper, et.al.) which, again, claimed that pay-for-play daily fantasy sports games are illegal under applicable state law. In November of 2013, the parties to that lawsuit entered into a confidential settlement agreement, which resolved any claims that Langone had, or could have (at the state or federal level), against all of the defendants named in that action.
While the underlying legal issue remains unresolved, it is worth noting that, as of the date of this blog post, neither Langone, nor any other party, has (to our knowledge) a pending lawsuit that challenges the legality of daily fantasy sports.
Of paramount significance, several high profile organizations, such as Major League Baseball, USA Today and Sports Illustrated have recently launched proprietary or co-branded daily fantasy sports offerings. Last week, daily fantasy sports industry leader, FanDuel, announced that it received $70 million in financing from investors including NBC Sports Ventures. This high-level involvement, coupled with reports from Bloomberg regarding the surge of investment from Wall Street over the past couple years, provides further encouragement to those hoping to see the legality of daily fantasy sports games vindicated.
Going, Going, Langone?
The recent inactivity by Christopher Langone following unfavorable or, at best, uncertain outcomes to his prior legal challenges is a positive sign for those concerned with questions relating to the legality of daily fantasy sports contests – as is the involvement of big names in publishing, professional sports and Wall Street. However, there is no guarantee that Langone himself, or other parties, will permanently refrain from bringing future legal challenges to the daily fantasy sports model in Illinois, or other jurisdictions.
Further, the increased involvement of big business and Wall Street will not necessarily shield these types of fantasy sports games from additional legal scrutiny. In fact, such high-level involvement could bring more attention from regulatory bodies. Nevertheless, these are very positive developments for the daily fantasy sports space.
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.