FANTASY SPORTS
Investors Must Do Their Homework Up Front
Fantasy Sports Operators and In order to reliably determine where any particular
fantasy sports game or contest is legal, stakeholders should consider the degree to which chance influences the outcomes of their games and contests, and what each state’s law defines as unlawful gambling. In addition, to avoid trouble, fantasy games should be structured so that the winning outcomes are determined as much as possible by each participant’s own skill and knowledge, not the skill and knowledge of the other players or of the athletes. Prudent fantasy sports site operators and
investors should consider engaging legal counsel to conduct a 50-state survey of the laws, statutes and attorney general opinions of each of the fifty states to aid in determining whether their proposed fantasy sports game, platform, entry fee and prize structure are legal.
sports, there is no question that fantasy sports games and contests run afoul of many state laws. Because laws vary from state-to-state, and the tests for games of skill versus games of chance can be somewhat subjective, it is important for fantasy sports site developers, operators and investors to carefully review their proposed games, platforms, entry fee and prize structures to determine in which states their games and contests can be offered. We have reviewed the legal terms and conditions of the paid-entry fantasy sports websites of 40 members of the FSTA. Based on our review, most, but not all, of the 40 sites exclude players from four states (Arizona (38), Iowa (36), Louisiana (38), and Montana (38)). But while the FSTA member sites appear to be in general consensus on these four states, the sites are wildly inconsistent with regard to their assessment of the law in virtually all other states. One site prohibits play in zero states, while another site prohibits play in 25 states, and half of the 40 surveyed FSTA sites prohibit play in anywhere from six to thirteen states.
fantasy sports games has come exponential growth of fantasy sports, from 12.6 million U.S. participants in 2005 to nearly 35 million in 2014”
“With the birth of daily In order to avoid legal pitfalls, it is not enough for
fantasy sports sites to simply post legal terms and conditions. Site operators must also develop and implement internal processes and technical safeguards to effectively exclude players from the states they and their counsel determine to be prohibited. While all of this can be a daunting and costly exercise to perform prior to launch, it can help operators and investors lesson the legal risks and costs associated with defending against enforcement actions and related scrutiny and controversy. In the end, putting the time and money to get it right up front will pay huge dividends, including protecting an individual’s liberty. The UIGEA fantasy sports exemption has lulled many into a false sense of complacency. But jail and multi-million dollar fines are no fantasy. Rather, they are real possibilities for fantasy sports operators and investors in many states, including states where many fantasy sports sites are up and running.
David Apfel is Founder and Co- Chair of the Goodwin Procter’s Gaming, Gambling & Sweepstakes Practice; Robert Crawford is Co- Chair. Richard Evans – who also contributed – is a Columbia Law School student and Goodwin Procter summer associate.
64 OCTOBER 2014
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