The fantasy sports industry has developed into a multi-billion dollar industry in the world. With recent endorsement deals by professional leagues, turn on any sporting event these days and you are guaranteed to see advertisements for two of the biggest players in the industry, FanDuel and DraftKings. These companies provide daily fantasy leagues with no long term commitments.
The big question is, how are fantasy sports legal? Online poker sites were recently shut down because they were considered gambling…how is this any different?
The carve out for fantasy sports is found in the Unlawful Internet Gambling Enforcement Act of 2006 (“UIGEA”) under the definition of a “bet or wager.” The statute states that the term “bet or wager” does not include:
participation in any fantasy or simulation sports game or educational game or contest in which (if the game or contest involves a team or teams) no fantasy or simulation sports team is based on the current membership of an actual team that is a member of an amateur or professional sports organization (as those terms are defined in section 3701 of title 28) and that meets the following conditions:
(I) 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.
(II) 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.
(III) No winning outcome is based–
(aa) on the score, point-spread, or any performance or performances of any single real-world team or any combination of such teams; or
(bb) solely on any single performance of an individual athlete in any single real-world sporting or other event.
The important part of the statute is that it defines fantasy sports as a game of skill with outcomes reflecting “the relative knowledge and skill of the participants.” Some sort of analysis is involved when you enter a fantasy league and it is not purely a game of chance, much like it were when play online poker. Although you cannot control the actual performance of each individual player on a fantasy team, you can research and strategize based on prior statistics and circumstances involving each member of a fantasy team.
What about daily fantasy sports?
The legality of daily fantasy sports has recently come into the spotlight, as New Jersey Congressman Frank Pallone has called for a hearing to look into its relation to gambling. “Fans are currently allowed to risk money on the performance of an individual player,” Pallone said. “How is that different than wagering money on the outcome of a game?” Additionally, the Michigan Gaming Control Board recently stated that it believes daily fantasy sports are not legal in the state of Michigan.
It will be interesting to see what this leads to, as many feel the UIGEA needs to be updated as daily fantasy sports were never considered when the statute was written.
