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Fantasy sports website gaming – legality still in question

When Texas Attorney General Ken Paxton’s office released a January opinion stating paid online fantasy sports contests violated state gaming laws, many believed the question of legality of such sites’ paid components was settled.

After all, an AG’s opinion has the weight of law unless or until it is successfully challenged in court.

But two developments on the issue late last week indicate the matter is far from settled. 

On Thursday, Paxton announced a settlement with the FanDuel website requiring the company to stop accepting paid entries for cash prizes statewide on May 2.

Often the sites’ advertising alludes to huge financial payouts to individuals but the actual mechanism of how the individual was awarded the prize is not discussed.

Under the agreement, FanDuel can continue to operate “free” games online in Texas.

According to Associated Press accounts, FanDuel said it disagrees with Paxton's opinion, but worked with his office to "map out our plan to wind down our operations in Texas."

Based on consultations with TAB’s legal counsel, TAB has cautioned stations on accepting advertising for such sites as FanDuel because of the potential that such online fantasy sports contests featuring a paid component could be viewed as illegal gaming in Texas.

A provision in the Texas Penal Code, §47.05, makes it a criminal offense to “communicate, with the intent to further gambling, information as to bets, betting odds, or changes in betting odds.”

Paxton’s January opinion gave rise to broadcasters’ increased caution.

That opinion, however, is being questioned in court. 

Boston-based DraftKings, the other well-known fantasy sports site, is seeking a Dallas judge’s ruling to allow it to continue Texas operations.

On Friday, the company filed an 87-page motion seeking a declaratory judgment.

DraftKings contends that daily fantasy sports contests are games of skill, not chance, and as such comply with Texas law.

The State of Texas views it differently and minced no words in the January AG opinion.

“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.”

TAB will report developments on the pending court case as they become available.

Questions?  Contact TAB's Michael Schneider or call (512) 322-9944.

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