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September 5, 2013

The Legality of Betting on Fantasy Sports: What’s the Line?

by Sam Ranard

As quickly as online poker sites are being shut down, or moved to some obscure island, daily fantasy sports gambling websites are popping up. While the government cracks down on online gambling and sports betting, ”daily” fantasy sports betting is beating the odds. Legally, the differentiation that makes one form of online gambling legal, and another illegal, is whether the game is a game of chance or a game of skill. Fantasy sports have been deemed a “game of skill” in most states, therefore legalizing making wagers on fantasy sports. Before we go all in, it is important to understand what fantasy sports are, what ”daily” fantasy sports are, and where the two stand in the legal spectrum.

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(For the record, I am absolutely not an attorney and am not giving legal advice in any way. Nor am I encouraging gambling)

Many sports fans already participate in and understand how fantasy sports work (If you are not familiar with fantasy sports click here for more information).  Unlike traditional sports betting, where you bet on a single

outcome of an event, fantasy sports rely on the total daily or  weekly productivity of all of your players combined, for the duration of that sport’s season. This requires more skill than just picking a team to win a game. A fantasy manager must decide who to draft, trade and who to bench or who to start based on several factors. Daily fantasy sports take the level of skill required a step further than season long fantasy. In daily games, a manager picks players for a one day period of time, as opposed to drafting players at the beginning of the season. We will get in to the differentiating factors below.

What are games of chance and what are games of skill?

A game of skill requires the player to have one or more of the following: A knowledge of the game strong enough to give the player an edge, a highly developed strategy or tactic, superior physichal abilities and the ability to use one’s knowledge effectively and readily in execution or performance. Games of chance on the other hand require much more luck than skill. Common games of chance are dice games, spinning wheel games, lotteries, slot machines and most other casino games. Games of skill on the other hand are games such as physichal sports, skill based card games (A New York court recently ruled poker as a “game of skill”) and fantasy sports, to name a few.

Why does it matter if a game is a game of chance or skill?

For legal purposes, this differentiation means everything. Many state laws allow people to make wagers on games of skill, but not on games of chance. The more skill elements a game requires, the more likely it is to be ruled legal.
However six states; Arizona, Iowa, Louisiana, Montana, Vermont and Maryland, do not allow thier citiznes to gamble on games of skill or chance. In effect, while sports betting and online casinos continue to be shut down, the popularity of  legally wagering on fantasy sports is taking off. As fantasy sport wagering begins to increase in popularity, there will surely be challengs as to whether fantasy sports is truly a game os skill or chance.

athlete-stock-market-starstreet-launches-daily-fantasy-baseball-game-ddc5b4096cDaily fantasy leagues as opposed to season long fantasy leagues require an even higher degree of skill. Therefore, daily fantasy gambling is less likely to be found illegal than season long fantasy. In an interview with FORBES magazine, Nigel Eccles, the CEO of FanDuel, the most popular online daily fantasy sight, said, “We have done statistical analysis as to the skill nature of the game and we can actually show that it is skill-predominant. We can show that a highly skilled player beats a non-skilled player ninety percent of the time.”

Eccles added a few other factors that make daily fantasy more skill based than season long fantasy. For starters, in daily games, there is no “chance” of having a player get a week, month, or season long injury – man, what bad luck that would be. A manager is not bound to these players for an entire season as they would be in season long fantasy. For example, if you drafted Tom Brady in a season long league for your first pick, and in week 2 he suffered a season ending injury, your team would take a substantial hit. In a daily game, you would just simply not draft Brady the next day. The chance of encountering incalculable, bad luck factors is minimized in daily leagues. But keep in mind that fantasy leagues of any duration are still games of skill and can be gambled on legally, daily fantasy wagering is just the least likely to be found a game of chance as opposed to skill.

So as of right now, and the foreseeable future, gambling on fantasy leagues is a safe bet, according to multiple sources. There are a few positives out there for fantasy wagerers. First, fantasy wagering sites are not at risk of being shut down anytime soon, so your account cannot be lost forever, money included. Additionally, online poker and sports betting sights use off shore sites to base their companies in an attempt to thread legal loopholes. Therefore it can be quite difficult to withdraw funds from your account (but only takes a few click to deposit). Additionally, many sites require wagerers to go through third party sources to make transactions. On the other side of the coin (see what I did there), fantasy sites, due to their legality, allow users to make deposits and withdrawals in seconds and even instantly with Paypal.

Have fun and may the odds be ever in your favor. If any laws or rulings come about on games of skill, games of chance and fantasy wagering, Courts & Sports will be sure to report it!

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