Daily fantasy sports games are illegal gambling in Texas, AG says

Devlin D'Zmura, a tending news manager at DraftKings, a daily fantasy sports company, works on his laptop at the company's offices in Boston.
Devlin D'Zmura, a tending news manager at DraftKings, a daily fantasy sports company, works on his laptop at the company's offices in Boston. AP

Participating in daily fantasy sports amounts to illegal gambling in violation of Texas law, according to an opinion released Tuesday by Attorney General Ken Paxton.

“Odds are favorable that a court would conclude that participation in daily fantasy sports leagues is illegal gambling,” the opinion said.

Under Texas law, it is illegal to wager on the “partial or final result of a game or contest or on the performance of a participant in a game or contest.”

Daily fantasy operators argue that their contests are not games of chance because success is largely due to the skill and preparation of participants.

“However,” Paxton concluded, “Texas law does not require that skill predominate.”

The opinion says: “It is beyond reasonable dispute that daily fantasy leagues involve an element of chance regarding how a selected player will perform on game day. The participant’s skill in selecting a particular player for his team has no impact on the performance of the player or the outcome of the game.”

In Texas, attorney general opinions are nonbinding – courts have the final determination of what is legal or not – but the opinions also carry weight in legal challenges.

Paxton’s opinion was sought by state Rep. Myra Crownover, R-Denton, who also asked him to determine the legality of season-long fantasy leagues.

Such leagues, Paxton said, also appear to violate Texas gambling laws. But he added that courts are not likely to hold participants in traditional leagues accountable because the law allows for private games where nobody receives a “rake” or a portion of entry fees to run the game, and all participants share the same chance of winning and losing.

Participants in daily fantasy choose from a menu of athletes from professional or amateur sports, compiling points based on statistical performance, such as yards gained in football or points scored in basketball.

The online games typically last one day to one week, with the faster turnaround allowing more contests to be played — and more money to be spent — than the season-long games in fantasy leagues formed among friends and family.

It is a relatively new and largely self-regulated industry, with operators required to interpret each state’s laws — most of which do not mention fantasy sports — to determine whether the games are allowed.

Multistate battle

Other states are increasing their scrutiny of daily fantasy sports by other states.

Nevada banned the games in October when its Gaming Control Board declared that the games are illegal gambling, joining five other states where operators block residents from playing — Arizona, Iowa, Louisiana, Montana and Washington.

New York’s attorney general moved to ban the fantasy sites as illegal gambling operations, winning a short-lived court order in December to stop the businesses from operating. An appellate judge halted the ban after an emergency appeal by FanDuel and DraftKings, the largest concerns in the daily fantasy business, allowing them to operate in New York while the appeal continues.

Illinois’ attorney general also issued a late December opinion finding that daily fantasy sports violate the state’s gambling laws, prompting lawsuits from FanDuel and DraftKings, and the attorney general of South Dakota came to a similar conclusion but added that he was awaiting guidance from the state’s gaming regulators.

In addition, a federal grand jury in Florida is investigating fantasy sports, and officials in California, Georgia, Maryland, Massachusetts and Michigan are studying the legality of the games, according to published reports.

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