AG Calls Fantasy Sports Websites Illegal Gambling

Attorney General Ken Paxton issued an opinion Tuesday saying popular daily fantasy sports games constitute "prohibited gambling" in Texas, according to a press release from the Attorney General's office. 

“Paid daily ‘fantasy sports’ operators claim they can legally operate as an unregulated house, but none of their arguments square with existing Texas law,” Paxton said in a statement. "Simply put, it is prohibited gambling in Texas if you bet on the performance of a participant in a sporting event and the house takes a cut.”

Fantasy sports players fill a roster from a pool of actual players, whose on-field performance translates to points for the fantasy team. There are different variations — many of which do not involve playing for money — including season-long leagues where there is one player draft at the beginning, and weekly and daily leagues which re-draft every week and every day, respectively.

Daily fantasy sports leagues in particular almost always require participants to pay an entry fee, which then goes into the winner's pool — but not before the business running the website takes a cut. Paxton also argued that the daily games are unique among fantasy leagues in that they are not dependent on skill but are based almost entirely on chance, which would make that participation fee an illegal bet. 

The ruling is a blow to websites like FanDuel and DraftKings, the two companies that dominate the daily fantasy sports industry. Even if you aren't one of the millions of people who play fantasy sports, you're likely still intimately familiar with these two websites from their incessant flow of T.V. ads. 

"We strongly disagree with the Attorney General’s prediction about what the courts may or may not do if ever presented with the issue of whether daily fantasy sports are legal under Texas law," DraftKings' attorney Randy Mastro said in a statement. "The Texas Legislature has expressly authorized games of skill, and daily fantasy sports are a game of skill. The Attorney General's prediction is predicated on a fundamental misunderstanding of [daily fantasy sports]. We intend to continue to operate openly and transparently in Texas, so that the millions of Texans who are fantasy sports fans can continue to enjoy the contests they love."

FanDuel echoed its industry competitor. 

"Today’s advisory opinion by the Attorney General of Texas is founded on a misinterpretation of the law and misunderstanding of the facts about fantasy sports," FanDuel attorney John Kiernan said in a statement. "Fantasy sports has always been a legal contest of skill in Texas."

The websites first came under fire in October after the New York Times reported that the industry was loosely regulated and left the door open for what was essentially insider trading and gambling. Since then, a number of states, including Texas, have begun to re-evaluate the legality of daily fantasy games. Illinois and Nevada have recently banned daily fantasy sports, and the Attorney General of New York is suing both FanDuel and DraftKings in an effort to prevent the sites from operating there. The two companies are apparently also being investigated by the F.B.I., according to the Wall Street Journal

Paxton's ruling is not equivalent to legislation banning daily fantasy games in the state, but it does mean that if a legal challenge is made in an effort to prevent Texans from playing daily fantasy sports, it would likely succeed.  

You can read Paxton's entire ruling here: 

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Leif Reigstad