Daily Fantasy Sports Gains Acceptance

By Chuck Hatfield

In June, Colorado and Missouri became the 9th and 10th states to legalize daily fantasy sports contests. In "daily" fantasy sports, a player uses the internet to choose a team for a short period of time (usually a day or a week) and competes against others for a pot of money. Historically, the states have treated this activity as illegal gambling. But the trend is heading rapidly toward legalization, regulation and taxation.

Fantasy sports are exempt from the Unlawful Internet Gambling Enforcement Act of 2006. This means federal law does not prohibit this form of Internet wagering. But many states consider fantasy sports games to be illegal gambling either because the state considers them games of chance or because state law prohibits wagering even on games of skill.

Some states (Kansas and Rhode Island being prominent examples) allow fantasy sports because they have determined that skill is a predominant factor. Other states have passed legislation to specifically exempt fantasy sports from gambling bans. In addition to the ten states where fantasy sports are now legal, 16 states have considered or are considering legalization measures during 2016.

The fantasy sports industry estimates that 50 million people currently participate in some sort of fantasy sports game. The sheer number of participants (and the revenues associated with them) means that fantasy sports are likely to gain acceptance as a legitimate business and source of tax dollars.

As the states consider legalization, a basic pattern emerges. States want appropriate consumer protections to ensure that games are run fairly, rules are transparent and payments are made when due. They also want protections to prohibit participation by minors and problem gamblers. ESPN recently reported that the fantasy gaming industry has "upwards of 75 lobbyists working in 30 states" making it likely this type of gaming will not remain a pure fantasy for long.

Chuck Hatfield is a member of the firm's Business Litigation practice group. Chuck works from the firm's Jefferson City office. For more information please contact Mr. Hatfield or your usual Stinson Leonard Street contact.

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