Whether daily fantasy sports (DFS) are legal is an issue that has been debated nationally since October 2015, when DFS industry leaders DraftKings, Inc. and FanDuel, Inc. were accused of engaging in insider trading. On February 4, 2016, Rhode Island Attorney General Peter Kilmartin released an advisory opinion concluding that DFS is likely to be found legal in a state court.
Under current law in many states, DFS wagering arguably constitutes “unlawful gambling.” Since October 2015, state attorney generals across the country have been asked to opine whether DFS is legal under their respective state’s laws. The AGs in most instances have found DFS betting as impermissible. To name a few, the attorney generals in New York, Illinois, Texas, and Mississippi have issued advisory opinions declaring DFS illegal under state anti-gambling statutes.
AG Kilmartin’s opinion comes to a different conclusion, reasoning that DFS is likely to be held as legal in a Rhode Island court. The conclusion is particularly interesting because Rhode Island uses the “dominant factor” test in determining whether an activity constitutes unlawful gambling. This test implements a heavier burden than the “substantial chance” test utilized in New York, where a state court on a preliminary injunction motion recently found that DFS is illegal.
Under the dominant factor test, an activity constitutes unlawful gambling “when an element of chance dominates the distribution of prizes, even though such a distribution is affected to some degree by the exercise of skill or judgment.” Kilmartin’s opinion, however, did not provide an explanation for his conclusion. Since he opined DFS is legal, it is clear the AG believes that DFS is not dominated by chance. Yet, we are left in the dark as to his reasoning.
Kilmartin ended his advisory opinion with suggestions for the Rhode Island legislature. He state that while he believes DFS to be legal, “a high level of regulation should be established to ensure criminal elements do not infiltrate the game, youth participation is barred, [and] addiction issues [are] addressed … .”