On April 5, Strange announced that his office had found that daily fantasy sports (DFS) constitute illegal gambling in the state and that his office had sent cease and desist letters to both DraftKings and FanDuel giving them until May 1 to pull out of Alabama.
In a press conference, Strange said that he was pleased that both operators complied with his order and that both FanDuel and DraftKings agreed to block access to their content websites from Alabama IP addresses after the letters were sent. In addition, FanDuel and DraftKings agreed they would process Alabama-based IP user requests to withdraw customer accounts within seven days of receiving them. Strange said, “As Attorney General, it is my duty to uphold Alabama law, including the laws against illegal gambling. The daily fantasy sports operations violate state law because a player stakes something of value on a contest of chance in order to win a prize. While there is a measure of skill involved in creating a fantasy sports roster, in the end contestants have no control over the performance of the players on their rosters. This activity is illegal under Alabama law,” according to AL.com.
In November, two men from Jefferson County filed a federal lawsuit against FanDuel and DraftKings. They alleged that the operations qualified as illegal gambling and that their DFS games were misrepresented as games of skill, not of chance. Both plaintiffs were seeking to recoup lost money and to obtain class-action suit status for all Alabama residents who had lost money on fantasy sports websites.
In October, a probe into the DFS industry was launched by the Federal Bureau of Investigation and the U.S. Department of Justice. To date, 12 states have declared paid DFS contests illegal.
Meanwhile, in neighboring Tennessee, just one day after Strange made his announcement regarding the cease and desist letters, Attorney General Herbert Slatery issued an opinion stating that DFS is considered illegal gambling under state law. However, measures were approved by the Tennessee legislature to amend what is defined as gambling and to allow DFS operators the opportunity to obtain licenses to operate in the state.
Signed into law by Gov. Bill Heslam this week, the Tennessee legislation gives operators of DFS until July 1 to either exit the market or apply for licenses. Should they choose the latter; operators will be subject to a 6 percent tax on their revenue from the state’s customers, in addition to license fees that have yet to be specified. Heslam’s signing of the bill is only the third time that pro-DFS legislation has been approved by a state governor since the DraftKings scandal last October rocked the industry. In March, both Indiana and Virginia’s governors signed DFS bills into law.