Tuesday, September 15, 2015

Gaming / Gambling - Fantasy Sports

    It is that time of the year. Fall. When leaves turn burnt orange, blaze red, and sunshine yellow; students return to school; the air has that crisp bite to it, and friends and co-workers play fantasy sports.

    Fantasy sports originally were a smaller affair than they are now, but the growth of fantasy sports into a multi-billion dollar industry has created tension with the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA), 31 U.S.C.A. §§ 5361-5367.  See Sept. 14, 2015 letter from Frank Pallone. At the heart of the UIGEA is a prohibition on financial institutions from accepting payments relating to unlawful internet gambling. 31 U.S.C. § 5363. Unlawful internet gambling is defined as using the bet the Internet to place a bet or wager.  31 U.S.C. § 5362(10).  A bet or wager is defined as "staking or risking ... something of value upon the outcome of a contest of others, a sporting event, or a game subject to chance...."  31 U.S.C § 5362(1)(A).

    While some might argue that picking a fantasy sports team is a game of chance, others contend that it is a skill.  Whether fantasy sports are chance-based or skill-based is essential to the industry's existence because the UIGEA contains an exception to the definition of a bet or wager that specifically exempts fantasy sports provided that the games "reflect the relative knowledge and skill of the participants" 31 U.S.C. § 5362(1)(E)(ix).

    Representative Pallone's letter is unlikely to affect the status of fantasy sports, and it is more likely a response to New Jersey's recent attempt to legalize sports gambling that failed. National Collegiate Athletic Assoc. et al. v. Gov. of State of New Jersey, et al. (3rd Cir., Aug. 25, 2015) (finding that the law repealing prohibitions on sports gambling violated the Professional and Amateur Sports Protection Act).

- Henry Park

updated on 10/16

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