Alabama Attorney General Luther Strange has ruled that daily fantasy sports sites are illegal under his state’s laws and sent cease and desist letters to FanDuel and DraftKings to stop operating in the state.
The two companies must stop accepting entries from state residents by May 1.
“As attorney general, it is my duty to uphold Alabama law, including the laws against illegal gambling,” Strange said in a news release. “Daily fantasy sports operators claim that they operate legally under Alabama law. However, paid daily fantasy sports contests are in fact illegal gambling under Alabama law.”
The state’s gambling laws say any activity where a person stakes something of value on a contest of chance, even when skill is involved, in order to win a prize is illegal. Strange acknowledged that there is skill involved in daily fantasy sports rosters, but contestants ultimately have no control over their players’ performance. Since injuries can force players out of games, the results of paid daily fantasy sports contests largely depend on chance, Strange said.
Strange noted in his release that 11 other states have also declared fantasy sports illegal.
Alabama, however, is one of about 30 states which is currently considering legislation to regulate and legalize daily fantasy sports. A bill before both legislative chambers would clarify that fantasy sports are legal in Alabama and “establish the Fantasy Contests Act to regulate the operation of fantasy or simulated contests in the state.”
Also coming out against daily fantasy sports was Tennessee Attorney General Herbert Slattery, who has issued a non-binding opinion that all fantasy sports—including traditional season-long contests—could constitute illegal gambling under the state’s laws.
“While participants may use skill to select players for their teams, winning a fantasy sports contest is contingent to some degree on chance,” Slattery wrote. “Namely, the participants do not control how selected athletes perform in actuality on a given day. Athletes’ performances are affected by many fortuitous factors – weather, facilities, referees, injuries, etc.
“Thus, absent legislation specifically exempting fantasy sports contests from the definition of ‘gambling,’ these contests constitute illegal gambling under Tennessee law because they’re all predicated on an exchange of money, even though many sites offer fantasy sports leagues at no cost.”
Slattery’s opinion, however, is not legally binding according to The Tennessean newspaper. The opinion was requested by House Minority Leader Craig Fitzhugh as the state considers its own licensing and regulation legislation for the industry, the paper said.
A DFS bill has already been approved in the state’s Senate. The bill would legalize DFS contests and require the Tennessee Secretary of State’s office to set up guidelines for companies to register and charge fees and possibly tax revenue.
Legislative Efforts
Meanwhile, legislative efforts to define and legalize fantasy sports in as many as 30 states continued.
In Missouri, the state’s House gave initial approval to a bill to allow daily fantasy sports and exempt the sites from state gambling regulations.
DFS sports sites would pay an annual $5,000 registration fee and face some consumer protection requirements. The bill has been supported by the DFS industry.
The bill needs to pass a second vote before moving to the state’s Senate for consideration.
In Illinois, a bill to legalize DFS contests has been delayed as lawmakers continue to work on the proposal, according to The Southern Illinoisan.
Illinois is a state where its attorney general has also ruled DFS contests illegal. The bill is still in committee and facing an approaching deadline for consideration, but state officials have asked for an extension to continue working on the bill and draft regulations.
Also, a group calling itself Fantasy Sports For All held a rally at the opening home game of the Baltimore Orioles to encourage fans to contact their state legislators in support of allowing fantasy sports.
Maryland is also considering regulating and legalizing DFS sites, but current bills would put the issue before voters in a November referendum. Some lawmakers reportedly want to hold off on the referendum to further study the issue.
The state passed a law in 2012 legalizing traditional season-long fantasy sports, but the status of daily fantasy sports is unclear in the state. Maryland’s attorney general has advised the legislature that the issue needs to be clarified in the law.
Hearings on the referendum were scheduled for late last week as the legislature is set to adjourn April 11. If the referendum is not passed by then, it will not be on the November ballot.
Colorado is another state where legislation on DFS sites is facing a tight schedule as that state’s legislative session is winding down.
The bill in the Colorado House of Representatives would require leagues to register with the state. A state Office of Fantasy Sports within the Department of Regulatory Affairs would oversee background checks on those who operate the games to keep out felons, according to the Denver Post.
The law would only apply to sites with more than 7,500 players and would not affect season-long contests amongst small groups of players.
Testimony was heard last week before a House committee, but no vote was taken. The NFL’s Denver Broncos and DraftKings supported the bill at the hearing, according to the Associated Press.
Other Developments
In another matter, both DraftKings and FanDuel have agreed to stop staging contests on college sports in an agreement with the NCAA.
The voluntary decision comes after months of discussions between the daily fantasy sites, the NCAA, member institutions and various state legislatures, ESPN reported.
“We appreciate and commend DraftKings and FanDuel’s action to stop offering contests involving college, high school and youth sports,” NCAA president Mark Emmert said in a press release. “This action culminates months of hard work between all parties to reach a place that is good for amateur sports and most importantly, the young people who participate. We will work diligently with our member schools over the coming year to ensure such amateur sports ‘carve outs’ are included in pending states’ legislation.”
Both companies also issued statements on the agreement.
“FanDuel has had months of productive conversations with the NCAA, their member institutions and various state legislators to better understand their concerns around fantasy sports contests based on amateur athletics,” the company told ESPN. “It is clear that this is an issue that matters to a variety of constituencies and we feel that the best path forward is to suspend offering these contests pending resolution on the issue within state legislatures.”
DraftKings said it feels suspending contests on college sports is the “best path forward for the industry at this time.”
“We continue to see tremendous support for fantasy sports in legislatures across the country, with nearly 30 states advancing thoughtful and appropriate regulations for fantasy play,” DraftKings said in its statement. “We will work closely with the NCAA and lawmakers on a carve-out for collegiate sports in any proposed regulatory framework moving forward. DraftKings is committed to ensuring that fantasy sports players are able to continue to play these skill-based contests that bring them closer to the sports that they love.”
College sports, both football and basketball, represent only 3 percent of FanDuel’s revenue, according to ESPN.
