Living in a Fantasy: How Fantasy Sports Leagues Circumvent Most Gambling Laws
By: Nadia Farashahi
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In the past decade or two, the way people engage with sports has shifted from physical participation to digital experiences. Technology has enabled fans to incorporate both professional and amateur events in their personal entertainment.[1] Many people are acquainted with betting on game outcomes in the style of Las Vegas. Now, modern technologies have also “facilitated vicarious involvement by allowing sports fans to become ‘part of the action’ by engaging in fantasy sports.”[2] Fantasy sports leagues are contests where participants compete against one another using fictional teams. These fictional teams are “arranged in virtual leagues and are comprised of actual athletes who are deemed to ‘play’ for them.”[3] Outcomes are based on preset scoring systems linked to the statistical performance of players in actual sporting events.[4]
At the start of the fantasy sports industry, drafts were completed on the phone and fantasy experts were few and far between.[5] With advancements in technology, online commissioner services were able to bring fantasy sports leagues online.[6] Computers could to provide instantaneous access to data concerning different games and players.[7] And especially with fantasy football, the biggest fantasy sports league, this step to the online realm made a huge difference in growing its audience.[8]
This expansion and popularity brought with it concerns about gambling. The National Football League itself saw fantasy football as too close to gambling for comfort.[9] But in the United States, this determination of whether a contest is a game of skill or gambling is up to each individual state.[10] Many states prohibit gambling where participants pay to receive winnings based entirely on chance.[11] However, in states where gambling is legal, this type of gambling is normally strongly restricted. Given this contention, most states allow fantasy sports, even those that are pay-to-play leagues, contingent on the idea that “winning” does not depend on the result of an actual game.[12] Participation in fantasy sports leagues focuses on a myriad of factors that must be taken into account, including injuries, coaching styles, prospects, weather patterns, depth charts, etc.[13] A 2018 study by the Massachusetts Institute of Technology found that the game of fantasy football is “inherently a contest that rewards skill.”[14]
On the federal level, Congress passed the Uniform Internet Gambling Enforcement Act (UIGEA) in 2006 to address gambling on the internet.[15] The UIGEA prohibits any person engaged in the business of betting from “knowingly accepting credit, electronic fund transfers, checks, or any other payment involving a financial institution to settle unlawful internet gambling debts.[16] This federal law was meant to serve as a supplement to state gambling laws, explicitly stating that none of its provisions shall be construed as “altering, limiting, or extending any federal or state law that regulates gambling in the United States.[17]
While there are various federal laws that address gambling, the UIGEA contains a direct reference to fantasy sports leagues.[18] In the definitions section of the UIGEA, the term “unlawful internet gambling” is defined as:
plac[ing], receiv[ing], or otherwise transmit[ing] a bet or wager by any means which involves the use, at least in part, of the internet where such bet or wager is unlawful under any applicable Federal or State law in the State or Tribal lands in which the bet or wager is initiated, received, or otherwise made.”[19]
Within the definitions section, the UIGEA creates a carve out for fantasy sports betting, stating that the term “bet or wager” does not include “participation in any fantasy or simulation sports game . . .” given certain conditions are met.[20] Thus, under federal law, fantasy sports leagues are legal games of skill.
More recently, fantasy sports’ legal has become even clearer. In 2018, the Supreme Court decided Murphy v. National Collegiate Athletic Association and struck down the Professional and Amateur Sports Protection Act, which banned states and individuals from operating sports-gambling schemes.[21] States were now able to legalize sports betting within their own borders if they chose to do so, and “the fantasy industry rejoiced.”[22] Greg Ambrosius, founder of the National Fantasy Baseball and Fantasy Football Championship, commented on this Supreme Court decision, stating that “[i]f sports betting is [okay], then certainly fantasy sports is [okay].”[23] Although the UIGEA still provides a framework for what types of online gambling are allowed, the Murphy decision firmly established each state’s right to regulate sports betting. Therefore, in the states that legalize sports gambling, “there will be no real risk that fantasy sports erroneously will be deemed illegal sports gambling as sports gambling itself will not be illegal.”[24]
[1] Robert B. Frazier, Don’t bet on it: Allowing a fantasy sports league may be gambling with legal trouble, kirton mcconkie (Feb. 2016), https://www.kirtonmcconkie.com/publication-363.
[2] Id.
[3] Id.
[4] Id.
[5] Steve Gardner, Money. Power. Women. The driving forces behind fantasy football’s skyrocketing popularity, usa today (Dec. 20, 2023, 1:12 AM), https://www.usatoday.com/story/sports/nfl/fantasy/2023/12/15/fantasy-football-sports-economy/71870731007/.
[6] Id.
[7] See Frazier, supra note 1.
[8] Gardner, supra note 5.
[9] Gardner, supra note 5.
[10] Distinguishing Fantasy Sports From Sports Betting, fantasy sports & gaming ass’n, https://thefsga.org/distinguishin.g-fantasy-sports-from-sports-betting/.
[11] Frazier, supra note 1.
[12] Frazier, supra note 1.
[13] Distinguishing Fantasy Sports From Sports Betting, supra note 10.
[14] Distinguishing Fantasy Sports From Sports Betting, supra note 10.
[15] Kevin Vela, Why Playing Fantasy Sports Is Legal (For the Most Part), vela wood (Oct. 7, 2013), https://velawood.com/why-playing-fantasy-sports-is-legal-for-the-most-part/.
[16] 31 U.S.C.A. § 5363 (West 2006).
[17] Vela, supra note 15; see 31 U.S.C.A. § 5363 (West 2006).
[18] Kevin Vela, Why Playing Fantasy Sports Is Legal (For the Most Part) Part II, vela wood (Jan. 15, 2024), https://velawood.com/why-playing-fantasy-sports-is-legal-for-the-most-part-part-ii/.
[19] 31 U.S.C.A. § 5362 (West 2006) (emphasis added).
[20] Id.
[21] 584 U.S. 453 (2018).
[22] Gardner, supra note 5.
[23] Gardner, supra note 5.
[24] Richard L. Brand & Glenn C. Colton, What the Supreme Court’s Murphy v. NCAA Decision Means for Fantasy Sports, ArentFox Schiff (Aug. 7, 2018), https://www.afslaw.com/perspectives/alerts/what-the-supreme-courts-murphy-v-ncaa-decision-means-fantasy-sports.
Image via PlayToday.co: https://playtoday.co/blog/guides/fantasy-sports-betting/