Another state Attorney General has ruled that daily fantasy sports is illegal gambling, dealing the latest in a series of unfortunate headlines for the once ascendant industry.
The bearer of Tuesday’s bad news was Ken Paxton of Texas, who issued an opinion stating:
Under section 47.02 of the Penal Code, a person commits an offense if he or she makes a bet on the partial or final result of a game or contest or on the performance of a participant in a game or contest. Because the outcome of games in daily fantasy sports leagues depends partially on chance, an individual’s payment of a fee to participate in such activities is a bet. Accordingly, a court would likely determine that participation in daily fantasy sports leagues is illegal gambling ‘under section 47.02 of the Penal Code.
“Simply put, it is prohibited gambling in Texas if you bet on the performance of a participant in a sporting event and the house takes a cut,” Paxton said via press release. “These sites are also wrong in claiming an actual-contestant exception, which applies only to contestants in an actual skill or sporting event. And unlike some other states, Texas law only requires ‘partial chance’ for something to be gambling; it does not require that chance predominate.”
In Texas, the courts have the responsibility of determining what is legal, and the opinion of the Attorney General is nonbinding. However, it may carry weight in legal challenges, the Austin American Statesman reports.
Paxton also found season-long leagues to fall under the definition of illegal gambling of section 47.02 of Texas code, but said that private leagues in which no rake is taken may be protected from prosecution.
DraftKings responded with a statement attributed to counsel Randy Mastro, stating it intends to continue operations in Texas.
“We strongly disagree with the Attorney General’s prediction about what the courts may or may not do if ever presented with the issue of whether daily fantasy sports are legal under Texas law. The Texas Legislature has expressly authorized games of skill, and daily fantasy sports are a game of skill. The Attorney General’s prediction is predicated on a fundamental misunderstanding of DFS. We intend to continue to operate openly and transparently in Texas, so that the millions of Texans who are fantasy sports fans can continue to enjoy the contests they love.”
Paxton joins an expanding list of attorneys general who have weighed in on daily fantasy sports in recent months.
- Based on an opinion from its Attorney General, Nevada ruled in October that daily fantasy companies were gambling operations and needed a gaming license to do business in the state.
- New York’s Eric Schneiderman issued industry leaders FanDuel and DraftKings cease-and-desist letters brimming with threats and incendiary rhetoric. The companies have been allowed by courts there to continue operating in the state pending a trial expected to take place in the coming months.
- On Dec. 23, Illinois’ Lisa Madigan said that daily fantasy contests amount to illegal gambling and asked FanDuel and DraftKings to amend their terms of services and cease accepting players from the state. Both companies have reached agreements with the Attorney General’s office that will allow them to continue operations through a trial scheduled for June.
- Last week, Maryland’s Brian Frosh asked the state’s legislature to further clarify state law relating to daily fantasy sports.
- A representative of Vermont’s Attorney General’s office said in a legislative committee hearing on Friday that daily fantasy sports contests violate the state’s gambling laws and that it does not support pending legislation that would exempt DFS.
Paxton’s opinion was announced on the same day that the Fantasy Sports Trade Association Winter Conference is set to begin in Dallas. The conference was moved from its previously scheduled location in Las Vegas after the Nevada Gaming Commission’s unfavorable ruling.
And though Paxton’s opinion is not what the fantasy industry would like to hear, attorney Daniel Wallach pointed out that the language is far less aggressive than what’s been seen elsewhere.
NY AG threatened criminal sanctions, whereas Texas AG simply forecasts how a court would likely rule based on existing law. Big difference.
— Daniel Wallach (@WALLACHLEGAL) January 19, 2016
Key language from Texas AG showing no intent to prosecute: “a court would likely determine” “odds are favorable that a court would conclude” — Daniel Wallach (@WALLACHLEGAL) January 19, 2016
Citing research from Eilers & Krejcik Gaming, LegalSportsReport.com reported that Texas accounts for about 8 percent of the total DFS market, making it one of the top five states in terms of active players.