Texas AG latest to declare that daily fantasy sports is illegal gambling

texas-attorney-general-daily-fantasy-sports-gambling Texas state Attorney General Ken Paxton (pictured) has added his name to the list of AG’s that have declared daily fantasy sports to be illegal gambling.

In December, Paxton announced that state legislators had asked him to weigh in on the legality of DFS. On Tuesday, Paxton released his opinion, in which he concluded: “It is prohibited gambling in Texas if you bet on the performance of a participant in a sporting event and the house takes a cut.”

Texas law contains wording that undercuts most pro-DFS arguments, in that it bans betting on an event determined either “solely or partially by chance” and a skill-game exception applies only to the “actual contestants in a bona fide contest for the determination of skill.”

Paxton’s opinion cites a number of instances in which chance can override the alleged skill of a DFS contestant, such as a baseball player’s decision to charge the mound and being ejected from the game. Paxton says the DFS proponents’ argument “that skill so predominates that chance is minimal is nonetheless an admission that chance is an element and partial chance is involved.”

As for who the “actual contestants” in a DFS contest are, Paxton relies on a 1994 opinion by his predecessor, which noted that the Practice Commentary attached to the gambling statute made it clear that the skill-game exception “is intended to exclude only awards and compensation earned by direct participation in the contest – the pole-vaulter’s cup, the pro football player’s salary – not the receipt of a wager on its outcome.”

Paxton notes that the courts have yet to test this interpretation but his reading of the opinion “remains unchanged” because “to read the actual-contestant exception as some suggest would have that exception swallow the rule.”

Paxton made clear that his opinion didn’t apply to traditional season-long fantasy contests in which players pool their entry fees and split the pot among themselves, so long as they take place in a “private place,” that “no person receives any economic benefit other than the personal winnings” and the risks of winning or losing are “the same for all participants.”

Paxton’s opinion was not unexpected, nor was his timing, which comes on the first day of the Fantasy Sports Trade Association’s 2016 Winter Conference in Dallas. What remains to be seen is whether Paxton chooses to follow the lead of New York AG Eric Schneiderman and bring a criminal complaint against DFS operators if they continue to offer services to Texas residents.

Texas – believed to be a ‘top five’ state in terms of DFS player volume – joins New York, Nevada, Illinois and Vermont on the list of state AGs who have declared over the past few months that DFS is illegal gambling. To date, only Schneiderman has gone to the courts but investigations are believed to be proceeding in Washington state, where the sponsor of an anti-DFS bill said on Monday that operators are guilty of class C felonies.

DFS operator DraftKings issued a statement saying the company would “continue to operate openly and transparently in Texas” based on their disagreement with Paxton’s opinion on “what the courts may or may not do when presented with the issue of whether daily fantasy sports are legal under Texas law.” Rival FanDuel has yet to announce its intentions.

The FSTA put out an equally strident statement calling Paxton’s opinion “a deliberate misinterpretation of existing Texas law,” while suggesting he “stop grandstanding” and work to develop “common sense protection issues.”

DFS operators like DraftKings and FanDuel had urged players in Texas to contact their local politicians to push for DFS legalization but perhaps they should have taken the more direct route they’ve taken in Florida. The Tampa Bay Times reported that the DFS industry have given state legislators 49 checks totaling $220k over the past five months.

The FSTA cut checks in Florida totaling $167,500, with $30k going to a political committee run by GOP Rep. Richard Corcoran, who is in line to become Speaker of the House in 2017. Rep. Mark Gaetz, whose pro-DFS legislation received a favorable committee vote last week, received $10k.In addition to the FSTA’s largesse, FanDuel has doled out $26k on its own, while DraftKings distributed $26,500.