Despite the federal prohibition of “online gambling,” fantasy sports are cropping up everywhere – especially last month during March Madness and now as baseball season gets underway.
Yet, online fantasy games are exempt from the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA), which prohibits gambling businesses from knowingly accepting payments from a bet or wager made over the Internet and that is unlawful under any federal or state law.
Fantasy sports are specifically excluded from the definition of “bet or wager” provided that prizes are not awarded based on the amount of fees paid to enter the competition. And the outcome of a fantasy game must be dependent on multiple sports events.
So, what are fantasy games? They are any fantasy or simulation sports or educational game or contest in which the team(s) is not based on the current membership of an actual team that is a member of an amateur or professional sports organization.
The laws relating to fantasy sports vary by state. However, in most states, fantasy sports are considered a game of skill and, therefore, are legal. To determine whether skill is at play, or simply a matter of winning by chance, most states rely on the “dominant factor test,” which requires a court to decide which factor – skill or chance – determines the result of the game.
The modern approach to conducting the dominant factor test appears to be subjective, as the court determines whether a game’s outcome is controlled more by chance or by some other factor that is under a game participant’s control. Although a few courts and legislatures have weighed in on how to conduct this test, courts generally disagree about whether the outcomes of borderline games, such as poker and backgammon, are determined predominantly by chance or by skill.
So, as you pick and choose the fantasy sports game you want to play – whether it be basketball, football, hockey, golf, bowling or take your pick – know you’re in compliance with federal regulations as long as three things are in place:
– All prizes and awards offered to winning participants are made known to the participants in advance of the game or contest, and their value is not determined by the number of participants or the amount of any fees paid by participants.
– All winning outcomes must reflect the relative knowledge and skill of participants and are determined mostly by accumulated statistical results of the performance of individuals, such as athletes, in multiple, real-world sporting or other events.
– No winning outcome is based on the score, point spread, or any performance or performances of any single real-world team, any combination of teams, or only on a performance of an individual athlete in any single real-world sporting or other event.
We don’t know about you, but we’re off to get our fantasy shuffleboard team together!
Suzan Hixon and Jennifer Monarch are attorneys with Wyatt, Tarrant & Combs LLP. Hixon is a member of the firm’s Intellectual Property Protection and Litigation Service Team, and Monarch is an associate with the firm’s Litigation and Dispute Resolution Service Team.