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Horseracing-based Fantasy Sports Game Found Illegal

In a follow up to a lawsuit we previously reported on, a California District Court ruled on summary judgment that a horseracing-based fantasy sports game constitutes illegal wagering. Specifically, the court found: the entry fees paid in contests offered by Defendant on its Derby Wars website are wagers under the Interstate Horseracing Act of 1978; Defendant is operating an offtrack betting system as defined in Section 3002(7) of the IHA; and the IHA can serve as a predicate for a California Business and Professions Code Section 17200 claim.

Players entering Derby Wars’ pay-to-play contests pay a fixed entry fee in exchange for the opportunity to participate in contests. The fixed entry fee is set in advance and does not change, and every player pays the same entry fee in a given contest. As an example, for a $40 prize, two players each pay a $22 entry fee to compete with each other.

Despite the recent wave of states that have passed legislation legalizing and regulating daily fantasy, the facts here ended up in an adverse result for the operator. Unlike many fantasy sports offerings where a number of people compete in a given contest, it appears that the head-to-head nature of this business model was a factor the court found important in reaching its decision.

Copyright © 2017, Sheppard Mullin Richter & Hampton LLP.

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About this Author

James Gatto, Intellectual Property, Technology, Sheppard Mullin Law Firm
Partner

Jim Gatto is a partner in the Intellectual Property Practice Group in the firm's Washington, D.C. office. He is also Co-Team Leader of the firm's Digital Media Industry and Social Media and Games Industry Teams, and Team Leader of the firm's Open Source Team.

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Mr. Gatto leverages his unique combination of nearly 30 years of IP experience, business insights and attention to technology trends to help companies develop IP and other legal strategies that are aligned with their business...

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