Online poker is gone. You can’t legally play craps or bet on sports over the internet. So how is FanDuel legal? Or is it legal?
First the basics: FanDuel is 100%, completely legal under federal law. (State laws vary, but please read more on that below). Unlike playing slots online, or internet poker, fantasy sports, including daily fantasy football, baseball and basketball, is considered (by the United States government), to be a game of skill.
(Full disclosure here: I’m a FanDuel affiliate. If you sign up on the site via one of links on this page and register with them, I receive a commission.)
But how is FanDuel legal?
For answer we turn to the UIEGA. Officially known as the “Unlawful Internet Enforcement Gambling Act” the UIEGA was a bill passed by both houses of the United States Congress and signed into law by President Bush in October of 2006.
As many people already know, it was the UIEGA that effectively killed online poker sites like PokerStars and FullTilt in the United States. It also reinforced and strengthened the illegality of sports betting online and internet casino gambling in the United States.
(Related: Promo code for FanDuel 2016)
What fewer people realize, however, is that the bill included specific exemptions, or “carve outs” for both horse racing and fantasy sports. These exemptions weren’t really highlighted or advertised, or even featured on the news, but they are there.
Why? Because apparently the 4 major sports leagues and the horse racing industry have better lobbyists. It is as simple as that. Major League Baseball itself asked for the fantasy sports carve out.
Jim Leach is the respected congressman (now retired), who co-authored the UIEGA. He explained the fantasy sports carve out to the Washington Post: “The carve-out, as I recall, was considered a kind of footnote. It was never much discussed during consideration of UIGEA because it was considered like horse racing, already part of the American betting scene.”
(Related: How is DraftKings legal?)
Carve Out Wording that Makes Playing on FanDuel legal:
The UIEGA specifically states that their definition of an illegal wager does not include: “participation in any fantasy or simulation sports game or educational game or contest in which (if the game or contest involves a team or teams) no fantasy or simulation team is based on the current membership of an actual team that is a member of an amateur or professional sports organization.”
Chunky wording to be sure, but it says, basically that fantasy sports for money is OK as long as you cannot bet on a team. This reinforces the notion that online sports betting is illegal. Wording in the UIEGA made sure you couldn’t get around this law by betting on all of the players on a team, which would effectively be betting on a team to win.
The legislation went on to state that the fantasy sports game is acceptable under the following other conditions:
1) All prizes and awards offered to winning participants are established and made known to the participants in advance of the game or contest and their value is not determined by the number of participants or the amount of fees paid by participants.
2) All winning outcomes reflect the relative knowledge and skill of the participants and are determined predominantly by accumulated statistical results of the performance of individuals (athletes in the case of sports events) in a multiple real-world sporting or other events;
3) No winning outcome is based [either]:
(a) on the score, point spread, or any performance or performances of any single real world team or any combination of such teams; or
(b) solely on any single performance of an individual athlete in any single real-world sporting or other event.”
To recap this wording in terms that guys like me can understand:
1) The prize pool must be set in advanced, and not be based on the number of people playing in the pool.
2) The outcome must be based on both skill and the statistical results of individuals playing in sporting games.
3) Winners cannot be determined by a team’s score, or point spread, or by the single performance of an individual athlete.
Oddly enough, the UIEGA made daily fantasy sports legal, even though at the time of the bill’s passage, there was no such thing as daily fantasy sports. The carve out only seemed to apply to the old-school, traditional season-long fantasy leagues. However a few years later, when the FanDuels and DraftKings starting appearing, the same UIEGA language that made season-long fantasy football legal, for example, made weekly fantasy football legal as well.
FanDuel and State Law
One caveat should be mentioned here. Playing on FanDuel is not against federal law, however that does not prohibit individual states from passing their own laws against the game. Nor does it prevent some busy-body state attorney general with too much time on his hands to try to stop you from being able to spend your money as you wish. And in fact, some states prevent you from playing fantasy sports. They say it’s gambling, as opposed to say, their government-run state lottery, which is completely skill-based.
Neither FanDuel, nor the second biggest fantasy sports website, DraftKings, accept payment from players in Alabama, Arizona, Delaware, Hawaii, Idaho, Iowa, Louisiana, Montana, Nevada, and Washington state. FanDuel does not accept players from Texas, however DraftKings does, as they are currently in middle of a lawsuit against the state.
Either way, these are the eleven states where there is any question at all about playing on FanDuel. Residents of the other 39 states and District of Columbia are good to go.
Some states, like Rhode Island, have attorney generals who have publically declared that fantasy sports does not violate any of their state’s laws. Other states have passed legislation that has made it clear that fantasy sports is completely legal in their respective states. In fact, in 2016, eight states, (Colorado, Indiana, Massachusetts, Missouri, Mississippi, New York, Tennessee and Virginia), passed legislation that clarified daily fantasy sports was legal in their jurisdictions.
The big one, (in terms of number of players), New York, saw its state legislature pass a bill in JUne that would legalize daily fantasy sports for its residents. Previously residents of New York were barred from playing on FanDuel. On August 3rd, 2016, however, the bill was signed into law by New York Governor Andrew Cuomo, opening up FanDuel for residents of the Empire State.
States Where it is Illegal to Play Daily Fantasy Sports
But please don’t take my word for it. I’m just an anonymous guy on the internet. I’ll just say that if there was any question at all about the legality of FanDuel, you would not see the participation of the major sports leagues into these sites.
In fact, sixteen different NFL teams have marketing partnerships with FanDuel. The NBA owns part of FanDuel. Salvatore LaRocca is the NBA’s president of global operations and merchandising. According to Washington Post, “NBA lawyers reviewed the laws pertaining to daily fantasy sports,” and that, accordingly to LaRocca, “We got comfortable pretty quickly.”
If it’s good enough for NBA lawyers, and lawyers for MLB, NFL teams, ESPN, NBC, etc., it’s good enough for me. So, if you’re as paranoid of breaking the law as I am, you can rest easy when it comes to FanDuel and be confident in the legality of playing daily fantasy sports for real money in the United States. (Photo courtesy of Craig Hawkins and Rondo Estrello via Flickr).