Many states have fantasy sports laws in place that are intended to create regulatory bodies within their borders for the purpose of overseeing and regulating fantasy sports operators. The big fantasy sports companies that come to mind are FanDuel and DraftKings, but many other corporate entities are doing business and thinking about launching gaming products for consumers to engage in different types of fantasy sports offerings.
These days, it’s nearly impossible to watch any sporting event or program without seeing an advertisement for daily fantasy sports. The fantasy and gaming industry has seen enormous growth, and that trend looks to continue as one of the leading DFS providers moves into the new realm of eSports.
DraftKings announced that it will be adding eSports to its list of offerings, which includes NFL, MLB, NBA, NHL, MLS, NASCAR, PGA, and MMA. DraftKings will begin offering fantasy eSports contests on October 1, 2015 with the start of the League of Legends World Championship. Participants will be able to play for free or compete against others in cash prize leagues, including a $3 entry fee contest featuring $25,000 in prizes.
The expansion to fantasy eSports should be a huge boon to DraftKings, as League of Legends alone sees more than 27 million gamers playing per day. In addition, the eSports audience is estimated to be about 134 million people worldwide, generating more than $600 million in annual revenue. It’s easy to see why DraftKings would want to expand into this market.
DraftKings is certainly not the first to notice the immense popularity of eSports, as last year’s League of Legends World Championship in Seoul, South Korea was broadcast in the United States via ESPN3, and the final round was watched by 27 million people worldwide. In contrast, Game 7 of the 2014 World Series between the San Francisco Giants and Kansas City Royals was watched by 23.5 million people.
One major point of consideration for DraftKings is that it will also need to expand its geographical boundaries; more than 60 percent of the eSports industry’s revenue comes from Asia, while DraftKings currently only operates in North America. This means that the majority of eSports fans won’t be able to take part. At least, not initially.
“We certainly have global ambitions here and want to be operating in as many countries as possible and as quickly as possible,” said DraftKings Chief Revenue Officer Matt Kalish, “The long game here is really tied in more with our international strategy.”
DraftKings also signed deals with six different eSports teams to form partnerships that are similar to the paid deals the company signed with major sports franchises from the NFL and MLB. Sports management company IMG brokered all the deals.
DraftKings has the money for these deals due in part to the fact that it recently raised $300 from various investors, including Fox Sports. At the time, CEO Jason Robins indicated that his top priority for the money was acquiring new users. By expanding into eSports, DraftKings aims to accomplish just that.
It was recently announced that Massachusetts Attorney General Maura Healey will be reviewing the legality behind DraftKings – the Boston, Massachusetts based daily fantasy sports operator known as one of the leaders behind the ever-evolving daily fantasy sports industry. This review comes on the heels of United States Representative Frank Pallone requesting a committee hearing to discuss whether fantasy sports are distinguishable from sports betting and other forms of gambling. Upon conclusion of her review, Attorney General Healey’s findings could potentially play in role in determining whether daily fantasy sports constitutes sports betting, an act specifically outlawed by the Professional and Amateur Sports Protection Action Act (PASPA), the federal statute that bans wagering on sports across the United States, except within states that already had existing sports betting operations prior to the enactments of the law.
Nonetheless, it remains to be seen how exactly Attorney General Healey’s findings could have a lasting impact on whether daily fantasy sports operators such as DraftKings and FanDuel continue to operate within the borders of her state. Healey – a staunch opponent of casino gambling – could issue an advisory opinion detailing her findings and highlighting the ways in which she feels daily fantasy sports does not fall within the parameters of the Unlawful Internet Gambling Enforcement Act (UIGEA), the law that specifically exempts fantasy sports from being categorized as sports betting so long as they follow the criteria listed therein.
However, an advisory opinion is just that – an opinion. It has no actual binding authority, and is simply issued as a way to advise on the constitutionality of or to interpret a law. Federal courts and most state courts are prohibited from issuing advisory opinions, and as such, they carry little to no legal effect. Some believe that in a state like Massachusetts – which currently has no laws expressly banning or permitting daily or season-long fantasy sports – the issuance of an advisory opinion going against the legality of daily fantasy sports could carry major repercussions for operators offering pay-for-play games within the state, because such an interpretation could give daily fantasy websites pause as to whether to continue offering such services. Yet, in 1991, former Florida Attorney General, Robert A. Butterworth, issued an advisory opinion cautioning against the alleged perils of fantasy sports and stating that participating in fantasy sports constituted illegal betting under the laws of the Florida. However, to this date, all daily and season long fantasy sports websites operate within the state.
As such, the main effect of Attorney General Healey’s findings would be dependent upon whether it leads the state legislature to issue laws explicitly banning daily fantasy sports or if law enforcement decide to enforce the advisory opinion based upon its interpretation that fantasy sports are illegal. While most states technically have statutes that could be interpreted as criminalizing fantasy sports, the majority of such states have simply failed to enforce such laws. As such, it remains to be seen whether the conclusions of Attorney General Healey would have any impact at all regarding whether major daily fantasy sports website will halt services, or continue to operate, business as usual. Thus, it is imperative for new and upcoming companies contemplating entering the realm of fantasy sports to continue to conduct due diligence in order to remain up to date as to the laws and legal issues they may face as this niche industry continues to come under scrutiny under the eyes of federal and state representatives.
Participation in fantasy sports has dramatically increased throughout the years especially with daily fantasy sites like DraftKings and FanDuel providing services to millions of participants every day. Louisiana is one of five states where participating in fantasy sports for money is clearly against the law. Louisiana outlawed gambling by computer in 1997, which would include participating in fantasy sports for money. Violators of this law are subject a maximum penalty of a $500 fine and six months in jail.
State Rep. Joe Lopinto is attempting to create an exception to Louisiana’s gambling by computer statute. It would permit fantasy sports for money via House Bill No. 475.
The bill amends §90 Gambling:
“D. Participation in any fantasy or simulation sports game, educational game, or contest as provided in R.S. 14:90.3(J) shall not be considered gambling for the purposes of this Section.”
In addition, the bill amends §90.3 Gambling by computer:
“J. Participation in any fantasy or simulation sports game, educational game, or contest shall be considered gambling by computer for the purposes of this Section, if all of the conditions are met:
(1) No fantasy or simulation sports team is based on the current membership of an actual team that is a member of an amateur or professional sports organization.
(2) All prizes and awards offered to winning participants are established and known to the participants in advance of the game of contest, and the value of the prizes or awards is not determined by the number of participants or the amount of any fees paid by those participants.
(3) All winning outcomes reflect the relative knowledge and skill of the participants and are determined predominately by accumulated statistical results of the performance of individuals in multiple real-world sporting or other events.
(4) No winning outcome is based on either of the following:
- On the score, point-spread, or any performance or performances of any single real-world team or any combination of such teams.
- Solely on any single performance of an individual athlete in any single real-world sporting or other event.”
This is not the first time that legislators attempt to legalize fantasy sports in the state of Louisiana. In 2010, a bill was on the floor to legalize fantasy sports for money, but it failed. State Rep. Joe Lopinto states, “the new law mirrors the same exemptions for fantasy sports carved out by the federal government in 2006, in the Unlawful Internet Gambling Enforcement Act” and will not encounter any issues getting passed.
Emily Lane, The reality of fantasy sports? It’s illegal in Louisiana when stakes are involved, NOLA (Apr. 17, 2015, 2:25pm), http://www.nola.com/politics/index.ssf/2015/04/fantasy_football_illegal_louis.html
House Bill No. 475 by Representative Lopinto http://www.legis.la.gov/legis/ViewDocument.aspx?d=936311