DraftKings Taking Texas to Court Following AG’s Opinion Letter

On Friday March 4, 2016, daily fantasy sports giant DraftKings filed suit in Texas state court against Texas’ attorney general over an opinion letter released in January by AG Ken Paxton declaring DFS constitutes illegal gambling. The filing was initiated shortly after the attorney general’s office announced it had reached a settlement with DraftKings’ ultra-competitor FanDuel to cease operations of paid entries in Texas.

In a 43-page petition, DraftKings asked the court for declaratory judgment, seeking it to rule that DFS games are one of skill, not chance. DraftKings and FanDuel have made similar cries throughout a host of states over the last few months, as opponents to DFS argue that daily fantasy games are analogous to online poker or other games based around outcomes out of the control of the players’ hands, thus constituting illegal gambling as defined by many states.

In January, Texas Attorney General Ken Paxton released an advisory opinion letter that concluded DFS games constituted unlawful gambling; this letter, DraftKings argues, violated a handful of state and federal equal rights and due process protections, as well as caused irreparable harm to the business and image of DraftKings’ operations in and out of the state.

Friday’s filing petition takes a unique approach to the “skills, not chance” argument concerning the legality of DFS games, comparing the process of picking and choosing the right lineup under a monetary restraint to ensure the best/most profitable outcome to be similar to “stock picking,” a contest in which players use hypothetical money to invest in real-life companies to see who has the most skill in stretching their fake dollars into the greatest profit margin. The petition also compares the elements of chance found in fantasy sports and referenced in the Attorney General’s opinion letter, such as game cancellation due to weather or a touchdown catch overturned by referees via instant replay, to similar chance elements found in other skill events like bass fishing, surfing, or bull-riding, where inclement weather or the unforeseen behavior of animals similarly is beyond the participants’ control. But just because there exists some elements of chance, DraftKings posits, that does not mean there is any less skill involved in working your way to the winners’ circle.

By filing the petition for declaratory judgment, DraftKings is asking the court to determine the legality of daily fantasy sports as interpreted under Texan law, as opposed to sitting back and waiting for the state legislature to come to a decision on the matter after what could be a long, drawn-out legislative process over the next few years. Texas, being one of the largest and most populous states, as well as one of the most sports-enthused, offers a wide customer base for DraftKings, which wants to continue to offer paid entries in the state to fill the hole created by rival FanDuel’s voluntary departure.

 

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