Daily Fantasy Sports Update – DraftKings Sues Texas AG; Activity in GA and IN
In January, Texas Attorney General Ken Paxton issued an opinion that daily fantasy sports (DFS) is likely illegal gambling under Texas state law “[b]ecause the outcome of games in daily fantasy sports leagues depends partially on chance.” On Friday, popular DFS operator DraftKings sued the Texas Attorney General seeking a declaratory judgment that DFS contests are legal under Texas state law. Earlier that day, FanDuel agreed to stop operating in Texas beginning May 2, 2016.
Two of the key issues in Texas will be similar to those raised in the lawsuits brought by DraftKings and FanDuel against Illinois Attorney General Lisa Madigan. The first is whether DFS is a game of skill. The second is whether the DFS contestants are “actual contestants” under Texas state law. Under the Texas law, a “bet” does not include “an offer of a prize, award, or compensation to the actual contestants in a bona fide contest for the determination of skill.” In the complaint, DraftKings argues that the relevant “contest” is the DFS contest and that the DFS participants compete in that contest. The Texas Attorney General interprets the relevant contest to be the games in which the professional athletes compete.
Meanwhile, Georgia became the latest state to have an Attorney General’s Office weigh in on the controversial industry, stating that “daily fantasy sports games are not authorized under Georgia law.” Also last week, Indiana became the second state to send a bill regulating DFS to the Governor’s desk for approval. The bill—S.B. 339—would legalize DFS, but require operators to pay a licensing fee, ensure that participants are at least 18 years of age, and abstain from offering contests based on amateur sports (i.e., collegiate athletics), among other requirements.