Deputy California Attorney General Karim Kentfield is handling the review, which is being done at the request of Sen. Scott Wilk. The investigation seeks to clarify whether daily fantasy sports are considered games of chance or skill. Below is the question posted on the attorney general’s website:
Does California law prohibit the offering and operation of daily fantasy sports betting platforms with players physically located within the State of California, regardless of whether the operators and associated technology are located within or outside of the State?
Fantasy companies are not currently regulated in California and as such are considered “gray,” meaning they are not breaking the law, but they are also not regulated or paying taxes.
Other states weighing in on legality of DFS 1f446v
The legality — or not — of fantasy contests has been a hot topic across the country of late. Earlier this week it was revealed that Underdog Fantasy shutter their platforms within 30 days.
Florida by March 1. Meanwhile, Arkansas regulators sent out cease and desist letters on Feb. 15 to PrizePicks and Underdog.
Those are the latest in conversations about whether some fantasy sports sites have crossed the line and if the unregulated market should be moved into a legal framework. In October, the New York State Gaming Commission Michigan regulators adopted rules outlawing the same.
The Virginia AG's opinion won’t immediately change how fantasy sports are regulated, but it may lay the groundwork for the state to follow what regulators in Michigan and New York have done and ban pick'em contests. Jill Dorson has more: https://t.co/EUuNFbdwbp
— Sports Handle (@sports_handle) December 18, 2023
In California, the question of legality isn’t limited to pick’em-style games, and the state regulator has made no move to implement rules around daily fantasy. Fantasy sports were under the microscope in California, where sports betting remains illegal, in 2015, when a regulatory bill ed the general assembly and stalled in the Senate.
There is no set timeline for the current AG’s office to issue an opinion.
‘Skilled players achieve … more success’ 4tl6c
The question at hand in California is broad, and as PrizePicks points out, nearly impossible to answer, at least to the satisfaction of all stakeholders, given the diversity of products offered.
PrizePicks wrote that the question asks for an answer that is a “mix of law and fact,” and instead chose to focus on the “factual question of whether skill is the predominant factor that determines the outcome of a particular contest” and only to focus on games offered by PrizePicks.
Under California law, games of skill are not considered unlawful, and according to the PrizePicks letter, “Games of skill are usually lawful, while gambling by any species of games of chance is generally considered unlawful.” The exception to this law would gaming in Indian Country, which is governed by the Indian Gaming Regulatory Act. Within the borders of the state — sovereign nations excluded — gambling is prohibited.
The state’s tribes have questioned the legality of fantasy sports, but PrizePicks spokesperson Eliza Richardson told Sports Handle in a statement that the company has “great respect for California’s tribal community and their sovereignty, and believe our comments will reinforce the longstanding legality of games of skill in California, including DFS.”
It is important to note that there are three methods to determine a game of skill vs. chance, and California has traditionally used the “predominant factor test,” in which games are tested to determine if skill trumps chance in determining an outcome. Many states that use this test have determined that sports betting, like some card games, is more a game of skill than chance.
With that definition in mind, attorney Frederick Woocher of Strumwasser & Woocher wrote that PrizePicks designs its games to be games of skill, and that participants must study everything from statistics to strategy to weather in order to be successful. The company goes on to cite studies by statistician Dr. Zvi Gilula that show that “skilled players achieve significantly more success in DFS contests.”
‘California law does not’ ban these games 4d4ve
The company also engaged Gilula study specific on PrizePicks games. He found that “all seven games covered by this report are games where skill can be exercised in a manner that leaves almost no detectable room for chance.”
Daily Fantasy Sports pick ‘em contests that mimic player prop betting are being outlawed in Michigan by the state’s gaming control board starting next month.https://t.co/LMCk8qUVLv pic.twitter.com/zez1SbLJkx
— GGB (@GlobalGamingBiz) October 17, 2023
Based on this data, and the idea that California law does not explicitly ban games of skill, Woocher makes the case for fantasy sports being, if not legal, at least not technically illegal in California. He also argues that its games do not fit the definitions of illegal lotteries, gaming, betting, or wagering. In addition, the company writes, its games do not violate the Unlawful Internet Gambling Enforcement Act (2006) because they do not fit any of the definitions of prohibited games under UIGEA.
“No one may operate a ‘game of chance’ without legislative authorization, or without the required federal, state, or local licenses,” Woocher wrote. “Daily Fantasy Sports (DFS) contests are not ‘games of chance,’ however, and therefore California law does not prohibit the offering and operation of DFS online platforms to contestants in the state.”
