The NBA season gets underway this evening and, with it, a flurry of fantasy basketball tournaments are poised to commence. Against this backdrop, this blog piece will examine one aspect of the evolving state and federal legal framework governing pay-to-play fantasy contests that offer prizes to winners. As discussed numerous times on this blog, the legality of fantasy sports contests that require an entry fee, and that pay out cash prizes, enjoys a favorable position with respect to federal law, but varies by state.
Along those lines, there is currently an exemption under federal law (specifically, the Unlawful Internet Gambling Enforcement Act (“UIGEA”)) that permits certain pay-to-play fantasy sports games that adhere to the designated criteria. In addition, favorable guidance was recently handed down by the Department of Justice (“DOJ”) regarding the scope of the Interstate Wire Act (the “Wire Act”) and its possible application to fantasy sports contests. There have been recent efforts to pass a Wire Act “fix,” however, to address some of the leeway granted by the recent Wire Act DOJ opinion, and these legislative maneuvers require closer inspection.
Fantasy Basketball: Above the Wire?
The Wire Act prohibits the use of wire communication facilities (including the Internet) for transmitting wagering information or bets. Historically, the DOJ interpreted the Wire Act as prohibiting all forms of wagering. However, in 2011, the DOJ reanalyzed the reach of the Wire Act (in the form of a letter opinion issued by the DOJ’s Office of Legal Counsel) and reversed its long-held position by concluding that the Wire Act’s gaming prohibition was limited only to betting on sporting events.
Accordingly, absent some future determination that the type of fantasy sport contests that are exempted under UIGEA are considered sporting events, the Wire Act will not apply to such contests.
The Wire Fix
In response to the DOJ’s opinion limiting the breadth of the Wire Act, U.S. Senator Lindsey Graham (R-SC) and Congressman Jason Chaffetz (R-UT) introduced a bill earlier this year, entitled the Restoration of America’s Wire Act (“RAWA”), that seeks to impose (or replace) certain prohibitions on Internet-based gaming that the DOJ’s letter opinion removed.
While this bill (and other rumored variations) would, if passed, impact online poker and other Internet gaming activity, RAWA specifically carves out fantasy sports, reiterating (and, accordingly, reinforcing) the UIGEA-based exemptions. Thus, as of the date of this post, there is no pending legislation designed to “fix” the Wire Act that would pose a threat to fantasy sports contests – including fantasy basketball contests.
Nevertheless, the continued legislative efforts designed to address the interpretive limiting of the Wire Act 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 basketball sports venture, or any other fantasy sports enterprise, you should retain competent legal counsel to help you design the contests in a way that comports with applicable law.