A year in review: US sports law - Sports Betting and Daily Fantasy Sports (Part 7)

Thursday, 18 August 2016

This article provides a broad overview of legal issues relating to sports betting and Daily Fantasy Sports in the United States of America between May 2015 to May 2016. This content of this article originates from the presentation by Professor Matt Mitten at the annual conference of the Sports Lawyers Association ("SLA") in Los Angeles in May 2016.

The content of this article originates from the presentation by Professor Matt Mitten at the annual conference of the Sports Lawyers Association ("SLA") in Los Angeles in May 2016.

For the ease of our readers we have broken down each topic presented by Prof Mitten into a series of articles. The the full update covers the following topics:

Agent Regulation and Team Sports – Labor Matters; 
Team Sports - Non-Labor Matters;
Individual Sports College, High School and Youth Sports;
Title IX/Gender Equity & Civil Rights;
Intellectual Property & Broadcasting;
Personal Injury and Safety,Stadiums and Venues;
Sports Betting/Daily Fantasy Sports;
International & Olympic Sports Miscellaneous.

The SLA, a non-profit, international, professional organization whose common goal is the understanding, advancement and ethical practice of sports law. Each year in May the SLA hosts an Annual Conference at which the above topics are presented and debated.

Sports Betting/Daily Fantasy Sports

NCAA v. Governor of the State of N.J., 799 F.3d 259 (3d Cir. 2015)

A panel of the Third Circuit affirmed the district court’s holding that SB 2460, which the New Jersey Legislature enacted in 2014 to partially repeal certain prohibitions on sports gambling violates the Professional and Amateur Sports Protection Act (“PASPA”), 28 U.S.C. §3701-3704. It concluded that “PASPA, by its terms, prohibits states from authorizing by law sports gambling, and the 2014 Law does exactly that.”

On October 14, 2015, the Third Circuit granted a petition for a rehearing en banc and vacated the panel’s ruling.

FanDuel/DraftKings Class Action Lawsuit (Johnson v. FanDuel, Inc., S.D.N.Y., No. 15-cv- 7963)

Class action suit filed in a federal court in Manhattan accusing DraftKings and FanDuel of negligence, fraud, and false advertising by misrepresenting their competitions are fair. The lawsuit came about following disclosure that the two daily fantasy websites allow their employees to enter each other’s competitions. The complaint asserts that employees of these companies have an unfair advantage over the general public through analytics, certain strategies, and how lineups on FanDuel would perform in DraftKings contests. (ESPN 10.8.15)

Department Of Justice And FBI Investigations of Legality Of Daily Fantasy Website’s Business Model

The Department of Justice and FBI are looking into whether the business model of daily fantasy websites to see if they violate federal law. DraftKings customers have been contacted by FBI agents to discuss their experience with the company. Questions asked by the FBI include their experience with the website, if proprietary information was passed on by the website involving contests, and if the site encourage or accepted bets from states banning the participation in daily fantasy sports. (SBD 10.15.15)

NCAA Prohibits Daily Fantasy Sports Advertising During Championships

The NCAA has told daily fantasy websites FanDuel and DraftKings that it will not be allowed to advertise during championship events. This ban would not apply to the College Football Playoffs (CFP), since the event is not ran by the NCAA. On August 27, 2015, NCAA President Mark Emmert, along with 10 FBS conference commissioners, and the student leader of the Division I student-athlete advisory committee sent a letter to FanDuel and DraftKings asking the websites to stop offering fantasy competitions on college games. (ESPN 10.21.15)

New York Attorney General Deems Daily Fantasy Sports to be Illegal Gambling

New York Attorney General Eric Schneiderman determined that daily fantasy sports constitute illegal gambling because the contests conducted by the daily fantasy websites are based on elements of chance to a “material degree.” (ESPN 11.11.15)

DraftKings and FanDuel Litigation Against New York Attorney General

(State v. FanDuel Inc., S.D.N.Y., No. 453056/2015) (State v. DraftKings, Inc., S.D.N.Y, No. 453054/2015)

Both DraftKings and FanDuel filed lawsuits to attempt to halt New York Attorney General Eric Schneiderman from banning daily fantasy contests in New York. DraftKings argued that “1.3 percent of the players who played daily fantasy baseball games up until the All-Star break won 91 percent of the money, which suggests that winning isn’t in fact random.” (ESPN 11.13.15)  

In December 2015, a New York state appeals court stayed a lower court injunction preventing FanDuel and DraftKings from operating in New York. The New York case is important for daily fantasy sites because eight states use essentially the same test as New York to define what constitutes gambling: New Jersey, Missouri, Oklahoma, Alabama, Oregon, Washington, Alaska, and Hawaii. (LegalSportsReport.com 12.11.15)

In January 2016, Attorney General Eric Schneiderman filed an amended lawsuit against FanDuel and DraftKings asking the websites to give back all of the money made by the companies in New York. (Reuters 1.11.16)

On January 11, 2016, the New York appellate court extended the stay of the injunction prohibiting daily fantasy sites from operating in New York until the case is tried. (Reuters 1.11.16)

FanDuel and DraftKings Stop Paid Daily Fantasy Games in New York

On March 22, 2016, FanDuel and DraftKings reached an agreement with New York attorney general Eric Schneiderman, pursuant to which they stopped operating paid daily fantasy sports contests in New York. However, they will be permitted to operate paid contests in New York if authorized by legislation.

Virginia Becomes First State in U.S. to Pass Legislation Legalizing Daily Fantasy Sports

On March 7, 2016, Virginia enacted the “Fantasy Contests Act,” which daily fantasy sports to legally operate in the state. Companies doing so must pay a licensing fee and comply with regulations.

For a summary of the legality of daily fantasy sports in all 50 states (current as of April 7, 2016), see Ryan Rodenberg, Daily Fantasy Sports State-by-State Tracker, available at https://espn.go.com/chalk/story/_/id/14799449/daily-fantasy-dfs-legalization-tracker-all-50- states

DraftKings and FanDuel Discontinue Offering College Daily Fantasy Sports

After the NCAA men’s Final Four games on April 2, 2016, DraftKings and FanDuel suspended daily fantasy contests involving collegiate sports in response to pressure from states wanting to legalize and regulate this industry. Several states have proposed prohibiting college and amateur daily fantasy sports contests as part of their regulatory frameworks. (Law 360 3.31.16)