The topic has been covered on this blog in the past, here, here, and here. However there have been many developments on the legality of daily fantasy sports (DFS) since Ricky’s article in November about the New York Attorney General’s order banning DFS sites from operating in New York. I will take a look specifically at developments in a few states that are relatively large population-wise and that hold strategic importance for the DFS industry in the their on-going battle for DFS games to exist legally.

New York

Attorney General Eric Schniederman’s order for DFS sites to cease and desist operations in the state was stayed and the industry’s two biggest players, DraftKings and FanDuel, have continued to operate for the time being. The litigation over whether DFS constitutes gambling under New York state law is ongoing and will likely continue for a long time unless a bill regarding DFS is passed in the state legislature and presented to Governor Cuomo.

However the issues do not stop there for the DFS industry in New York. The main payment processor for the DFS industry in New York, Vantiv, said they would stop processing payments for the DFS sites due to the Attorney General’s order and the shifting legal landscape regarding DFS in general. After Vantiv asked DraftKings to exit the New York market in November, DraftKings took them to court over the issue and won forcing them to continue processing payments in the state for the time being. However Vantiv has made it clear they no longer wish to process payments for the DFS industry after their current contracts run, this could be a huge issue for the industry as access to payment processing is vital to the sites operating.

California

In late January, the state legislature of California passed a bill proclaiming DFS to be legal by a vote of 62-1. California was the first state to pass a bill through a chamber of their legislature regarding DFS. The bill’s sponsor Adam Gray said “I believe California will be the first to pass and implement legislation that allows its citizens to continue to play a game they love in a safe and fair environment.” The bill provides a basic regulatory framework for DFS operation in the state including licensing for all operators. It also includes protections for players such as making sure their funds are all kept in separate accounts and not co-mingled with operator funds. The bill has been hailed as a victory for the DFS industry in the nation’s largest state.

Virginia

Following after California, Virginia was the second state to have a bill specifically regarding DFS pass through its legislature. However in late February they beat California to the legislative punch and they are the first state to have a bill pass both houses and be presented to the Governor. The Virginia bill also explicitly makes DFS legal, requiring operators to register with the Department of Agriculture and Consumer Protection and pay a $50,000 dollar fee for the right to operate in the state. Other provisions such as a minimum age of 18 to play and yearly audits of all operators were included in the bill.

Texas

Texas Attorney General Ken Paxton  issued an opinion that DFS games constituted illegal gambling under state law. Paxton noted that the games depend on the performance of real-life players, meaning that the outcome involved some amount of chance and that therefore it is expressly legal under state law. It is worth noting that Paxton, unlike Attorney Generals in New York, Nevada, and Illinois, did not ask the operators to leave the state.

The Federal Question

No federal body or agency has yet addressed the question of the legality of DFS under federal law. The issue seems to have lost a bit of steam in the national media,  although interestingly it was brought up in one of the Republican debates recently with the candidates including Chris Christie proclaiming that we have better things to worry about than shutting down DFS. The battle will continue and it doesn’t seem there is any obvious end in sight.

Ben Petitto

 


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