Two years ago, daily fantasy sports company FanDuel ended operations in Texas. But recently it resumed taking wagers in Texas, in opposition to the state attorney general’s opinion. The attorney general’s office Director of Communications Mark Rylander said, “We look forward to either the courts or the Texas legislature conclusively deciding the legality of paid daily fantasy sports.”
Also FanDuel recently joined DraftKings’ lawsuit that could determine the status of daily fantasy sports in Texas.
In January 2016, state Attorney General Ken Paxton declared DFS is illegal gambling under Texas law, which prohibits playing any game of chance for a prize, whether or not skill is involved. DraftKings and FanDuel argued skill is critical to DFS, but Paxton cited their claim and dismissed it.
He didn’t specifically direct DFS operators to leave the state, but in March, FanDuel informed its Texas customers it was ceasing operations there. Paxton allowed the company to exit before May 1 without paying a penalty. Under the settlement, the state and FanDuel agreed not to sue each other.
However, soon after, DraftKings announced it would continue to serve Texas and filed suit against Paxton. The issue is still being litigated, while DraftKings continues to operate in Texas and even hosted a live event in San Antonio. Now, after a two-year break, FanDuel has informed Paxton’s office it will re-enter the market with self-imposed restrictions such as not marketing directly to Texans and not implying that DFS is lawful in the state.
The newly formed FanDuel Group said the decision was a “business necessity” due to DraftKings position in Texas. FanDuel said the Texas market represented 7 percent of its business in 2015 but it faced a “material market disadvantage” by leaving. FanDuel’s valuation has declined and the company has had difficulty raising capital.
In an August 16 letter to FanDuel, Deputy First Assistant Attorney General Brantley Starr wrote, “The state does not agree that you may engage in fantasy sports gambling. The legality of that matter is at issue with another party in a lawsuit pending in Travis County. We would not object to you joining that lawsuit. Otherwise, the state may pursue appropriate legal actions against you.”
“Another party” is DraftKings. Although FanDuel had agreed not to take the state to court, the company formally intervened in DraftKings’ case and now both companies are listed as plaintiffs in the civil suit. Meanwhile, Fan Duel quietly reopened its platform to DFS players in Texas. Officials said, “Considering a variety of factors related to the operation of daily fantasy sports in Texas, we have re-entered the market while the issue is being resolved by the state.”
