FanDuel has reached an agreement with the State of Texas that allows the daily fantasy sports website to continue to operate in-state, so long as it only offers the free version of its games to Texans. In return, Texas won't sue the company, according to a press release from the Attorney General's Office.
After a number of high-profile investigations, including one by The New York Times in December, daily fantasy sports websites came under intense fire from critics claiming the sites offered illegal gambling. Many states, including Texas, moved to ban the websites from operating in-state.
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 in which 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. In January, Paxton ruled that paid daily games are illegal in Texas, arguing that they 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 constitute a bet.
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“I commend FanDuel for responsibly and pro-actively working with us to reach this settlement,” Attorney General Ken Paxton said in today's press release. “This will spare both the company and the taxpayers of Texas the expense of an extensive lawsuit that I believe would only affirm what my office has already determined.”
FanDuel is one of two major players in the daily fantasy sports industry. The other is DraftKings. After Paxton ruled against the activity in January, both companies issued statements opposing Paxton's opinion, but it appears only DraftKings is continuing its legal battle. The company filed an 87-page (yes, really) motion for declaratory judgment, attempting to convince the court that daily fantasy sports are games of skill and not chance.
“DraftKings is working collaboratively with legislatures and Attorneys General across the country to put in place a regulatory framework for our contests with thoughtful and appropriate consumer protections," DraftKings legal counsel Randy Mastro said in a press release. "Even so, due to recent actions in Texas, the company has today taken the responsible and unavoidable step of seeking a declaratory judgment to bring clarity to its legal situation. We look forward to presenting evidence to demonstrate that Daily Fantasy Sports are skill-based games and perfectly legal under Texas law, certainly no less so than other kinds of skill-based contests. We are committed to ensuring that our fans can continue to enjoy the contests they love."
Looks like even with Friday's agreement, the fight over fantasy sports in Texas is just beginning.