Is daily fantasy sports legal or illegal? If you have been following sports on TV in recent months, then you’ve likely seen an ad or two from FanDuel or DraftKings. These two fantasy sports titans are taking the world by storm, contributing to the multi-billion dollar fantasy sports industry. Daily Fantasy Sports websites, which allows players to draft a brand new team each day, have much to thank for the massive industry.
However, if you want in on the fantasy sports action, as do 57 million US citizens, then you may be wondering how this type of gameplay is legal when most states ban sports betting. The fact is that in most states, putting real money into fantasy sports is 100 percent legal. If you are interested in a fun and safe way to bet on sports games, then daily fantasy sports websites may be right up your alley. Here is why these sites are safe, regulated, and legal in most US states.
The History of Fantasy Sports
Fantasy sports is a game in which participants create teams that are made up of real athletes. The participants are all considered virtual managers who must base their decisions on actual statistics of athletes.
Fantasy sports started with the game of Rotisseries baseball and mostly local groups, as well as a mail-based service, offered it. Nevertheless, once the popularity of the Internet skyrocketed in the 90s, fantasy sports made its way online. Check out our Post on the history of fantasy sports.
The 2006 Unlawful Internet Gambling Enforcement Act is largely to thank for why fantasy sports betting is legal. The UIGEA was enacted to regulate banks and other such financial institutions that deal with transactions between Internet casinos and gambling consumers.
Many people disagreed with the passing of the UIGEA. However, it was tacked to the SAFE Port Act, which was a favored and paramount bill that had little chance of being voted down. THE UIGEA successfully halted the Internet gambling industry, and caused three of the industry’s biggest companies to withdraw from the United States.
UIGEA’s Application to Daily Fantasy Sports
With the UIGEA’s anti-online gambling stance, many wonder what its application is to Daily Fantasy Sports. However, you’ll be happy to know that the UIGEA explicitly excludes fantasy sports from its definition of gambling.
There are a few conditions to this:
- Awards and prizes must be established and disclosed to the participants before the contest starts
- How many participants are in the competition or the amount collected in fees must not determine the value of the prizes
- The outcome of the game must reflect the participant’s skills and knowledge and be determined by an accumulation of statistics on individual athletes.
- The winning outcome must not be based on the point spread, overall score or overall performance of a team.
- The winning outcome must not be based on a single performance of an athlete.
Why Fantasy Sports is Not Considered Gambling on the Federal Level
It is crucial first to note that the legal definition of what constitutes gambling is set at the state level. This is why fantasy sports websites must not only comply with the UIGEA but also individual state laws.
However, as far as the UIGEA goes, betting on fantasy sports is legal. This legality is due to fantasy sports being considered more a game of skill than one of chance, which thus makes staking money on it legal.
What State’s Prohibit Betting on Fantasy Sports
Although the UIGEA covers all 50 US states, some states created their own legislation, which deems fantasy sports as illegal. These states include:
- New York
In these states, such sites as DraftKings and FanDuel do not offer paid games. This is because whenever state regulation or laws are stricter on fantasy sports, their rules take precedent over the federal level.
The Predominant Purpose Test vs. Any Chance Test
The majority of states allow for betting on fantasy sports because they determine its degree of luck and skill using the Predominant Purpose Test. This test only requires that a game be mostly based on skill, but can have some elements of chance. However, the states that deem fantasy sports betting illegal are the ones that use an Any Chance Test. This means that if there is even the slightest amount of chance in the game, it is considered illegal.
Fantasy Sport’s Future
If you are a fan of fantasy sports, then the good news is that the gameplay likely has a bright future ahead. The federal government currently prefers to leave full control to the states. This has caused Nevada and New Jersey to enact laws that allow for the legality of online gambling, including online poker and casino games. If Nevada and New Jersey can prosper from the legality of online gambling, then it is likely that many other states will follow suite to legalize fantasy sports and other types of online betting.