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A Victory for DFS and the "Predominate Factor Test"

Article
08.17.2020
By Hailey Perkins & Scott Beckmen

On April 16, 2020, the Illinois Supreme Court officially adopted the "predominate factor test" and ruled in Dew-Becker v. Wu (2020 IL 124472) that daily fantasy sports (DFS) are, in fact, games of skill, and therefore permissible under Illinois law. This decision provided clarity to the DFS market in Illinois and reversed a controversial 2015 opinion issued by the Illinois Attorney General that had concluded DFS violated state gambling laws.

CASE BACKGROUND

Given the importance of this case, one would assume the actual money in dispute in the Dew-Becker case would have been significant as well – but that assumption would be incorrect. On April 1, 2016, Colin Dew-Becker invited Andrew Wu to participate in a $100 head-to-head DFS contest on the FanDuel Platform. Dew-Becker lost the head-to-head DFS Contest and filed suit against Wu on April 4, 2016. Yes, you read that correctly, $100.

Dew-Becker argued that DFS, under Illinois law, was considered unlawful gambling and thus, he was entitled to recover the $100 he lost. This argument was based on the Illinois Loss Recovery Act (LRA) permitting a person who loses a wager in excess of $50 to potentially recover the lost wager plus court costs. Wu ended up prevailing in the circuit court, but the court did not reach a conclusion on whether DFS should be classified as gambling. Rather, the circuit court ruled the LRA was not intended to "allow recovery when the gambling is not connected" between one person and another – since the bet occurred on the FanDuel Platform and not directly between the parties.

The appellate court affirmed the circuit court’s decision, effectively reasoning that a recovery under the LRA could only occur when there was a "direct connection between the two persons involved in the wager". Since the bet occurred on the FanDuel Platform, a direct connection between the parties could not be established, since the parties operated under virtual screen names and not their actual names. The appellate court went on to reason that, in the event Dew-Becker were to prevail under the LRA, then every contest on an internet gaming platform such as FanDuel would be subject to similar claims by any person who loses. Such a decision would cause a flood of litigation that would severely hamper the court and would be inconsistent with how current gambling and DFS platforms operate.

Somewhat buried in the appellate decision was the bomb that DFS followers dreaded. The appellate court stated that in order to determine if the LRA applies, they must first answer "whether the DFS contest in which [Dew-Becker] and [Wu] participated amounted to 'gambling.'" In Illinois, "[a] person commits gambling when he or she *** knowingly plays a game of chance or skill for money or other thing of value, unless excepted in subsection (b) of this Section." Thus, the appellate court concluded that "the DFS contest at issue was a game of chance, a game of skill, or some combination thereof and that none of the exceptions enumerated in section 28-1(b) apply. See id. § 28-1(b). Therefore, we assume arguendo that [Dew-Becker’s] and [Wu’s] participation in the head-to-head DFS contest at issue qualified as gambling."

ILLINOIS SUPREME COURT RULING

Still unwilling to let go of the $100 loss, Mr. Dew-Becker appealed again to the Illinois Supreme Court, which granted the petition review under the issue of "[w]hether the [LRA] applies in an instance where the gambling in question is facilitated by DFS intermediaries such as FanDuel."

In its opinion, the Illinois Supreme Court reached the same conclusion as the appellate court, but it immediately rejected its reasoning and instead went directly to whether or not the DFS contest should be considered gambling. In doing so, the Supreme Court examined three general tests (1) "predominant purpose test" or "predominate factor test"; (2) "material elements test"; and (3) "any chance test". The court reasoned that since every contest inevitably has some element of chance, the "predominate factor test" provided a "workable rule that allows for greater consistency and reliability in determining what constitutes a game of skill."

This ruling runs parallel to the trend toward legalizing sports gambling and the acceptance of DFS contests as games of skill. More than 20 states have now legalized sports gambling since the Murphy decision in 2018, and 43 jurisdictions currently permit DFS contests. However, the regulatory landscape surrounding DFS (and sports betting) remains convoluted and murky. The Dew-Becker decision provides an additional navigation point for the application of the "predominant factor test" to DFS that could provide clarity to the DFS landscape.

This article is part of the summer 2020 Esports, Sports Technology & Wagering newsletter update.

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