Should Daily Fantasy Sports Game Be Illegal?

Should Daily Fantasy Sports Game Be Illegal?

Published in The Lufkin Daily News, March 21, 2016

When Willy Wonka announced that five golden tickets to “the big prize” would be hidden in Wonka bars, the world erupted as people went out to buy Wonka bars in the vain hope of winning. The clever folks among them devised machines meant to compute “the precise location of the 3 remaining golden tickets.” Others, like Veruka Salt’s family, for instance, hired workers to obtain every Wonka bar they could, opening 19,000 of them per hour.

 The Jan. 13 Powerball drawing for a record $1.5-plus billion — the largest lottery jackpot in world history — generated $266.7 million in Texas sales. That’s a lot of money gambled on a game in which the odds of winning the jackpot are 1 in almost 300,000,000. Indeed, the odds of winning state-run gambling in the Powerball lottery run beyond pure chance and into near-impossibility, sort of like finding Mr. Wonka’s golden tickets. As The Economist magazine pointed out, “Buyers are around four times more likely to be killed by an asteroid impact this year. Lotteries are designed to be a bad deal …’’

Juxtaposed against the Powerball fervor was Attorney General Ken Paxton’s January 19 legal opinion on daily fantasy sports. While there are a variety of iterations in daily fantasy, games typically involve selecting a roster of players subject to a salary cap, and pitting that roster against others who do the same. Based on the performance of those players that day, the roster is awarded points. Earn more points than your opponent to win the money. Paxton concluded that daily fantasy sports amount to illegal gambling in Texas because winning them involves “an element of chance.”

Paxton’s opinion is correct on the straightforward question of whether or not daily fantasy sports amount to gambling as defined by state law, but “an element of chance” as the standard ignores the fact that winning daily fantasy sports requires knowledge of the rules, players, and numerous additional considerations. Where the lottery — a game of blind luck — is state sanctioned, State law prohibits games — daily fantasy — in which your chances of winning can be increased based on your knowledge, research, and strategy.

The Texas Constitution’s prohibition on gambling mandates that the Legislature “pass laws prohibiting lotteries and gift enterprises,” but then provides several exemptions including bingo games, raffles, and the state lottery. All these exemptions are games of pure luck. Bingo requires that players pay attention, lest they miss the call “G-47,” but there is no strategy involved. Even less involvement is required to win a raffle or a lottery.

There is no principled line drawn between permissible gambling and impermissible gambling either in the Texas Constitution or in statute. Even prohibited gambling has so many exemptions that they swallow the rule. The definition of “bet,” for example, exempts “an offer of a prize, award, or compensation to the actual contestants in a bona fide contest for the determination of skill, speed, strength, or endurance.”

Another defense to prosecution for gambling exists when “except for the advantage of skill or luck, the risks of losing and the chances of winning were the same for all participants.”

Under at least two these defenses — the private place defense and the same chances of winning but for skill or luck defense — it is clear that no daily fantasy sports player faces a serious risk of being legally penalized for playing daily fantasy sports. It is only the service providers who risk legal action.

Daily fantasy sports amount to illegal gambling as it is defined under current statute, but so does the lottery (all chance is certainly “an element of chance”). The only reason that the lottery is not prohibited is because the voters approved it in a constitutional amendment. This reveals a glaring inconsistency in Texas’s treatment of gambling. It makes more sense to draw a clear line between gambling that involves mostly chance (the lottery) versus gambling that involves mostly knowledge or skill (like bridge, or daily fantasy), or to prohibit gambling altogether.

John Colyandro is the executive director of the Texas Conservative Coalition Research Institute. Russell H. Withers is general counsel and policy analyst for TCCRI.  For more information about TCCRI, please visit them online at txccri.org.