AUSTIN — Attorney General Ken Paxton announced earlier this month that daily fantasy sports leagues constitute illegal gambling in Texas, adding to the recent onslaught of allegations against the online sports community.
Paxton released the opinion on Jan. 19, specifically addressing DraftKings and FanDuel for taking illegal bets and cashing in profits from online participants. The announcement came in response to a request made by state representative and chair of the Committee of Public Health, Myra Crownover.
“Recent questions on the legality of DraftKings and FanDuel prompted me to ask the Attorney General to look into these gaming sites,” said Crownover, “I requested this opinion to clarify the law. It is our responsibility to try to make sure no business is profiting from illegal activity in Texas.”
Crownover’s interest is not surprising as the business of fantasy sports has exploded in the past five years. According to the Fantasy Sports Trade Association, the number of annual players has increased from 32 million in 2010 to 56.8 million in 2015, with millions in revenue coming in for the companies. The association estimates 2 million players in Texas alone.
Paxton’s opinion clarified the difference between fantasy sports leagues and daily fantasy leagues. The biggest factors come down to whether the game requires skill to win and if a participation fee is held by the organizer of the game. In Texas, bets that depend on the partial or final result of a game, contest, or on the performance of a player are prohibited. Daily league players put to gather their own teams of professional athletes and compete based on how the players perform statistically on a day-to-day basis, which lawmakers are now deeming unlawful.
“Paid daily ‘fantasy sports’ operators claim they can legally operate as an unregulated house, but none of their arguments square with existing Texas law,” said Paxton in a statement, “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.”
The attorney general joins the ranks against daily fantasy sports with several other states, who in recent months, have been raising accusations and demands against the online sites.
On Nov. 10, New York Attorney General Eric Schneiderman issued cease-and-desist letters to DraftKings and FanDuel, and a judge ordered the companies to stop taking bets in the state. An appeals court ruled in Dec. that the companies can continue to take bets from New York while the courts determine legal proceedings. As the largest market with more than 1.2 million players in New York, the companies stand to lose a combined $35 million in revenue depending on how the court rule.
Illinois Attorney General Lisa Madigan also publicly stated that, regardless of the skill or luck that the companies claim are involved, daily fantasy sports are illegal under Illinois law. Madigan requested that DraftKings and FanDuel add Illinois to their lists of prohibited states that include Arizona, Iowa, New York, Louisiana, and Nevada.
DraftKings and FanDuel are not backing down. They assure the states and players that the games require a level of skill that separates it from traditional gambling. While the future of the leagues in Texas is unknown, players should expect a legal battle looming in the wake of Paxton’s announcement.