Whether or not operators of daily fantasy sports (DFS) are violating the Illegal Gambling Business Act (IGBA) is a question for a grand jury, which has been convened by the US Attorney’s office in Tampa, Florida to investigate the matter.

Late Friday, well-known gambling and sports law attorney with Becker & Poliakoff, a Fort Lauderdale law firm, Daniel Wallach, broke the news that has rocked the fantasy sports industry, in what has undoubtedly been the single worst week in the history of daily fantasy sports. If you’re a sports fan, especially one who participates in fantasy leagues and or daily’s, unless you’re been living under a rock, you’ve no doubt heard about the DFS “scandal” involving the industry’s two largest players, DraftKings and FanDuel.

An illegal gambling business is defined by the IGBA as one that operates in violation of state law, and an idiosyncrasy in the Florida law has been written about extensively by Wallach. The ambiguousness of the law could prove hazardous to DFS operators who claim their product is skill based; a distinction backed by the 2006 Unlawful Internet Gambling Enforcement Act (UIGEA) which specifically excludes fantasy sports that meet certain requirements, one being skill-based games.

A prohibition in Florida law, “the result of any trial or contest of skill, speed or power or endurance of human or beast,” applies to facilitators of such wagers, including financial institutions and operators and bettors equally who “aid, assist or abet in any manner” in the activity. However, a 1991 opinion by Florida’s 33rd Attorney General Bob Butterworth that states that NFL fantasy leagues that offer cash prizes for fee-based contests based on performance of the respective teams is illegal gambling, predates the explosion of DFS and leaves Florida’s legal situation unclear. Prior to the announcement of the grand jury investigation DFS companies weren’t being investigated by the current AG’s office in Florida, according to a CalvinAyre report.

Following the expiration of Florida’s compact with the Seminole tribe, the state is taking a closer look at its gaming market, and in an effort to be included in the conversation the Fantasy Sports Trade Association (FSTA) hired lobbyist Brian Ballard and his firm this summer, and within the past two weeks has given a total of $40,000 to four political action committees. The FSTA estimates that 3 million Florida residents participate in either DFS or traditional fantasy football leagues operated by FanDuel and DraftKings which often have big money at stake.

On Thursday a class action lawsuit was filed in a Manhattan federal court against FanDuel and DraftKings stemming from the recent revelation by both companies that their employees were allowed to participate in contests on each other’s sites for the same cash prizes available to the general population. Meanwhile, Yahoo has joined the other DFS operators and has prohibited its employees from participating in real-money DFS tournaments at rival sites.

One Response

  1. Steve Norton

    It’s hard to argue that betting on Fantasy Sports is different than betting on the outcome of a sporting event, or playing Black Jack or Craps. When investing in the market, you are buying a stock and hoping to get a reasonable dividend or benefit from increased company shares prices, because of improved earnings. The supporting arguments for Fantasy Sports, sound a lot like Florida’s Internet Cafes, where the customer is buying time online, rather than playing casino games. The questions before the FL Legislature; if it allows Fantasy or Sports Betting, Internet Cafes, or even destination casinos; is who should provide oversight and which jurisdictions can share in the tax revenues.

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