Alabama Attorney General Declares DFS Illegal

Alabama Attorney General, Luther Strange, has announced on Tuesdays that daily fantasy sports (DFS) will be classified as gambling in the state of Alabama and DFS operators such as DraftKings and FanDuel have to cease operation under Alabama law.

After reviewing the gambling status for the state, Strange sent cease-and-desist letters to the fantasy sports operators. According to the correspondence, both FanDuel and DraftsKing have until May 1, 2016 to stop offering any paid daily fantasy sports contests in the state.

A clear view

Strange claimed that it is his job to ensure the law is being upheld under his jurisdiction and he does not believe daily fantasy sports could qualify as legal activity.

He stated in a news release, “As Attorney General, it is my duty to uphold Alabama law, including the laws against illegal gambling. 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.”

While fantasy sports companies have been arguing that they operate a business based on games of skill, under Alabama law, their services cannot be considered legal. Alabama law states that “an activity qualifies as illegal gambling, if a player stakes anything of value on any form of a contest of chance, even when skill is involved, in order to win a prize.”

Strange also said that besides the legal language that clearly renders DFS an illegal activity in the state, he does not see how fantasy sports can be considered anything but a game of chance. To participate in DFS tournaments, players have to create virtual sports teams with real life athletes. These teams are then entered into paid contests and the outcomes of the virtual teams are dictated by the performance of the actual sportspersons.

The fantasy sports participants can win real cash and prizes from these contests. The more knowledgeable a player is about the abilities of the athletes, the greater are his chances of forming a strong virtual team. Strange agreed that there is definitely skill involved in crafting a fantasy roster of real-life athletes; however, he disputed that the contestants ultimately have no control over any of the players' performances. The outcome to a fantasy tournament ultimately depends on luck; as a player can fall ill, get injured or miss a large portion of a game. Strange said that we have to agree that at the end of the day, the results of paid daily fantasy sports contests are largely depend on chance.

Very different regulations in the states

The ruling from Alabama comes as the latest blast against daily fantasy sports in USA. While the DFS operators are lobbying to gain clear legal status in many of the states, the local governments are rummaging to produce legal structure to try and regulate the sport and establish some kind of legal framework to provide consumer protection. Despite their efforts, paid daily fantasy sports contests have now been declared illegal in 12 states.

In November 2015, two County men from Jefferson, Alabama also filed a federal lawsuit against DraftKings and FanDuel, claiming that their services constituted of illegal gambling. The two men sought to get money back from the sites, under a 150 year old, Alabama law that prohibits enforcement of gambling debts. The lawsuit was also after class-action status; to represent all the players from the state of Alabama, who had lost money in fantasy sports tournaments. The lawsuit also claimed that both FanDuel and DraftKings operate under misrepresentation that their matches are games of skill and not chance.

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