The DFS Situation in Texas
On Tuesday, January 19th of 2016, the Texas State Attorney General put forward an official statement inquiring a further investigation into the system that is daily fantasy sports. Ken Paxton was voted into the Texas State Attorney General position in just January of last year but has consistently pushed for traditional views to stay reinforced in Texas, which includes a strong anti-gambling stance. Due to Texas State Law banning any illegal forms of gambling that even display partial elements of chance, Paxton is officially calling for clarification of the game aspects for daily fantasy sports betting and whether or not the game is indeed legal. It is clear that if companies such as DraftKings and FanDuel are proven guilty of operating an illegal gaming institution, Attorney General Paxton is sure to force daily fantasy sports entirely out of Texas.
Texas Attorney General Paxton's First Impression
The initial opinion statement on the matter from Atty Gen. Paxton came in response to a fellow Texas State representative asking her superior for further clarity on the future of DFS. “It's my duty as Attorney General to look to the law, as passed by the people's representatives, to answer the questions put to this office.” Paxton, who has taken a first look at how daily fantasy sports betting operates, will dig deeper in his investigation to identify if and how DFS violates the state gambling laws of Texas.
“Paid daily ‘fantasy sports' operators claim they can legally operate as an unregulated house, but none of their arguments square with existing Texas law. 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.”
Although there has not been an official ruling, his opinion address to the state on Tuesday, claiming DFS is illegal, definitely sets the tone that the attorney general will be motivated to find significant evidence of the consistently growing industry.
The DFS Industry's Response
The major titans of the DFS industry include both companies, FanDuel, and DraftKings, which still claim to operate as a wholly legal entity. Legal Counselor for DraftKings, Randy Mastro responded to Attorney General Paxton’s address with a similar statement heard by DFS lawyers around the nation.
” The Texas Legislature has expressly authorized games of skill, and daily fantasy sports are a game of skill. The Attorney General’s prediction is predicated on a fundamental misunderstanding of daily fantasy sports. We intend to operate openly and transparently in Texas, so that the millions of Texans who are fantasy sports fans can continue to enjoy the contests they love.”
The defensive stance taken up by daily fantasy sports companies dates back to the initial federal legalization of the game in 2006. Under the Unlawful Internet Gambling Enforcement Act (UIGEA) put in place by United States Congress, daily fantasy sports sites do not constitute as gambling due to so many skill variables that impact game outcomes.
Rather than betting on your favorite team to win, daily fantasy sports players analyze player data such as workload percentage, red zone efficiency, coaching tendencies, player on player matchups, and the list goes on. However, participants with the ability to fund their accounts may still rely on chance for skill game competitions simply by guessing which players will do well instead of putting in hours of research. With a game that splits participants into sharks & minnows, 70 percent of contestants are claiming overall loses each year in daily fantasy sports.
Both sides seem confident that the United States Court System will settle the ongoing battles that are occurring in a handful of states within the Union. After citing Texas Statutes, which verify the state’s strict stance on partial chance elements, the attorney general finished with, “Accordingly, the odds are favorable that a court would conclude that participation in daily fantasy sports leagues is illegal gambling.”
On the other side of the table, major proponents of DFS took to the defense of the industry. Daily Fantasy Sports investor and Dallas Mavericks Owner, Mark Cuban, has invested millions in daily fantasy sports data and analysis. The Billionaire partnered with FantasyLabs, a statistical modeling site created by DFS “Great White Shark,” Jonathan Bales. “Hopefully, the stupidity and hypocrisy in a few states will be cleared up in the courts shortly,” said Cuban in regards to the Texas Atty Gen.’s opinion. In the months ahead, the controversial bubble regarding daily fantasy sports legality is bound to pop, although it is likely initial rulings will have to pass through a multitude of stages including appellate courts before a final decision can be made.