Texas Attorney General takes aim at FanDuel and DraftKings 

Ken Paxton publishes an opinion stating that daily fantasy sports is illegal under state gaming law 

Texas Attorney General Ken Paxton has taken aim at daily fantasy sports (DFS) operators FanDuel and DraftKings after publishing an opinion in which he says both firms are conducting illegal gambling in the state. [private]

Paxton’s opinion was issued in response to a request from a legislative enquiry from the chair of the Committee on Public Health, who asked whether the activity was legal under Texas gaming law.

In his opinion, Paxton said he had to consider whether DFS leagues constitute betting on the performance of a participant in a game, or, instead, bona fide contests for the determination of skill.

The AG noted DFS participants have to pay a fee to enter, with only some of that amount contributing to the prize pot while some of it is collected by the likes of DraftKings and FanDuel as rake.

By paying the fee, Paxton said players agree to win or lose something of value – a portion of the pot. The dispositive question, he added, was whether a win or loss is due to chance or skill.

FanDuel and DraftKings have long argued DFS is a game of skill, but Paxton said while “this may be true” Texas law does not require skill predominately and requires only partial chance for there to be a “bet”.

He listed examples of chance including player injuries, bad weather, and faulty equipment such as a deflated ball or cork in a baseball bat.

“It is beyond reasonable dispute that daily fantasy leagues involve an element of chance regarding how a selected player will perform on game day,” Paxton said in his opinion.

“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 said his opinion was just that, an opinion, but he believed the “odds are favourable that a court would conclude participation in DFS leagues is illegal gambling.”

In response, DraftKings said it “strongly disagreed” with Paxton’s predication about how the courts would rule on daily fantasy sports if the question of its legality was put before them.

“The Texas legislature has expressly authorized games of skill, and daily fantasy sports are a game of skill,” the operator said in a statement.

“The Attorney General’s prediction is predicated on a fundamental misunderstanding of DFS.

“We intend to continue to operate openly and transparently in Texas, so that the millions of Texans who are fantasy sports fans can continue to enjoy the contests they love,” DraftKings added.

In his opinion, Paxton also touched on season-long fantasy sports contests, ruling they too were illegal under state law if a league commissioner took a fee or rake.

Paxton said operators and players could avail themselves, however, so long as “play is in a private place, no person receives any economic benefit other than personal winnings, and the risks of winning or losing are the same for all participants.”

Paxton’s opinion comes after similar rulings in New York, Illinois and Vermont.