People Asked and the Texas AG Answered: Advisory Opinion Concludes Daily Fantasy Sports Illegal in Texas

On Tuesday January 19, 2016, Texas Attorney General Ken Paxton issued his advisory opinion on the legality of daily fantasy sports (DFS) under Texas law. In short, he did not apply the law to the DFS industry favorably.

Since October 2015, daily fantasy sports — namely, industry leaders DraftKings, Inc. and FanDuel, Inc. — have been threatened nationally under federal statutes, individual state laws, and consumer lawsuits. The firestorm was sparked by news of scandal.  On September 27, 2015, a DraftKings employee inadvertently released company data prior to the completion of the day’s DFS contests. The data was pertinent to bettors’ success in the games. Moreover, that same day, the employee won $350,000 on the website of DraftKings’ competitor, FanDuel, and allegations of impermissible insider trading practices began to fly.

In AG Paxton’s advisory opinion, he opined the “odds are favorable that a [Texas] court would conclude that participation in daily fantasy sports leagues is illegal gambling under section 47.02 of the [state’s] Penal Code.”  Texas law, concluded Paxton, “requires only a partial chance for there to be a bet”; meaning, although a bettor may use certain skills while engaging in a gambling activity, the game is considered a “bet” if chance plays any role in the outcome.  In that regard, the opinion stated:

It is beyond reasonable dispute that daily fantasy leagues involve an element of chance regarding how a selected player will perform on game day.  The participant’s skill in selecting a particular player for his team has no impact on the performance of the player or the outcome of the game.

Paxton’s opinion is similar to those of the attorney generals in New York and Illinois.  Unlike those states, however, state court litigation questioning the legality of DFS has not yet occurred in Texas.  Yet, as industry leaders DraftKings and FanDuel did in New York and Illinois, the DFS industry may soon file suit in Texas.

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