by Omar Ali-Shamaa
Daily fantasy sports (DFS) have grown into a multibillion-dollar industry in a few years. Traditional fantasy sports games are season long endeavors where friends, family, coworkers, or strangers compete against each other by building a team of professional athletes from a particular league, and earn points based on the actual statistical performance of players in real-world competitions. DFS is an accelerated version of traditional season long fantasy sports games, however the competition is conducted over a short period: usually a single day.
Recently, DFS websites such as FanDuel and DraftKings have brought under scrutiny the question of whether DFS is illegal gambling. However, many consider DFS to be legal under the the Unlawful Internet Gambling Enforcement Act of (2006) (UIGEA). The UIGEA outlaws internet gambling, mainly poker, but specifically carves out an exception for fantasy sports if the “winning outcomes reflect the relative knowledge and skill of the participants.” Proponents argue that DFS is a game of skill because of the complex nature of DFS. Users must make dozens of decisions about which players to buy, sell, and put on the field.
At the state level, DFS giants FanDuel and DraftKings have determined Arizona, Iowa, Louisiana, Montana, and Washington have laws that are unclear about the legality of DFS and do not offer paid entry games to residents of those states. As more states weigh the legality of these sites, they will likely have to determine whether DFS is a game of skill or one of chance.
Generally, courts see games arranged on a continuum. On one side are games of pure chance or luck such as roulette, lotteries, or bingo. On the other side are games of pure skill such as chess. The “reality” is that DFS fall somewhere in between. While DFS requires some knowledge and skill as to which player is more likely to do well based statistics or game matchup, it does require some chance as to whether the selected player will perform as expected or not play due to injury.
The DFS industry seems to be well aware of the risk and goes to great lengths to emphasize the amount of skill involved. In April 2015, Star Fantasy League, a fantasy sports technology company, released a study that found that “skilled players” beat unskilled players nearly 70% of the time in weekly fantasy football contests over the 17-week 2014-2015 season. Additionally, DraftKings CEO, Jason Robins, consistently compares DFS to playing chess or the stock market, spending $80 million from August 1 to September 15 promoting this “skill based game.”
Ultimately, the larger the DFS industry grows, the more scrutiny it will face. While DFS are legal under federal law and in 45 out 50 states because of the skill versus chance distinction, much remains to be seen as federal agencies and states look into regulating this industry. Just don’t bet on it happening anytime soon.
Omar Ali-Shamaa is a Senior Staff Member at the FIU Law Review. Mr. Ali-Shamaa can be reached at oalis001@fiu.edu.