Fantasy sports is no longer an isolated niche for fans of football or baseball who want additional incentive to watch the game. Daily fantasy sports (or “DFS,” as it’s known for short) have made the industry big business, as players can win money based on putting together teams in a variety of sports. Fan Duel and Draft Kings are the two biggest operators nationwide. The allure of big monetary prizes from playing DFS has drawn the scrutiny of legal regulators and lawyers across the country. Several proposed bills are before our state’s Legislature that attempt to address the issues surrounding fantasy sports.
What is fantasy sports?
For those not following the situation closely, in general, “traditional” fantasy sports are season-long competitions where individuals compete with others over the course of a sports season in NFL, NBA, Major League Baseball or other sports. These are the type of contests you think of as happening between friends or coworkers. Daily fantasy sports is an accelerated variant of fantasy sports involving contests occurring over a shorter period of time (hence the term “daily”). A real-life player is assigned a DFS salary and players are selected based upon a salary cap. Depending on the DFS game, an owner with the most points for that day/week wins a predetermined amount of money.
Is it gambling?
A study by the Washington State Gambling Commission reflects the fact that many Washington residents play a form of fantasy sports despite the fact that the status of these contests are not defined and even can be construed as gambling, which would be illegal. Washington is the only state in the nation that has prosecuted a fantasy sports operator.
Nationwide, states are trying to decide whether DFS should be considered gambling or not. The biggest fight is happening in New York, where the state attorney general’s office has dug in its heels against Fan Duel and Draft Kings. At this time, there is an appeal from a stay of an injunction which would prevent the DFS sites from operating in the state. A hearing on the matter is set March 9. However, other parts of the DFS business are being attacked as a payment processor has told its customers it would no longer process payments for DFS companies.
The key issues related to whether fantasy sports are legal is dependent on the definition of a “game of chance” coupled with the prohibition of the transmission of gambling information over the phone or Internet. Both are construed through the RCWs. It also is predicated on the interpretation of a “future contingent event” in the definition of gambling as outlined in RCW 9.46.0237. Essentially, the argument is that DFS players risk something of value upon the outcome of a future contingent event not under their control or influence.
Fantasy sports legislation in Washington
Washington state is one of many states determining how to classify fantasy sports — and to a more important extent, how to classify DFS. In 2016, there are three proposed bills in the state Legislature seeking to address fantasy sports. One bill, sponsored by state senators Doug Ericksen and Brian Dansel, seek to legalize DFS within the state and designate it as a game of skill. Another bill introduced by Sen. Pam Roach last year and held over for this year seeks to add a section to the RCWs to define fantasy competitions and exempt them from any classification as gambling. On the other end, a bill introduced in January 2016 by state Rep. Chris Hurst (D) would make fantasy sports a class C felony and a violation of the Consumer Protection Act.
We may find out this year whether or not fantasy sports — and specifically DFS — become legal in the state of Washington.
Want to know more about fantasy sports? Read Jason Cruz’s full article in the March 2016 NWLawyer, “The Battle Over Fantasy Sports Surfaces in Washington.”
Jason J. Cruz. Jason owns and operates Cruz Law, PLLC in Seattle, where he focuses his practice on business and real estate law. He is a board member of the Asian Bar Association of Washington and serves on the Publications Committee of the Business Law Section of the WSBA. He is also editor-in-chief of MMA Payout, a website dedicated to the legal and business aspects of the sport of mixed martial arts. He can be reached at jason@cruzlawpllc.com.
