State Attorney General Calls Fantasy Sports ‘Illegal Gambling’

Fantasy sports contests constitute “illegal gambling” under Tennessee law, state attorney general Herbert Slatery determined in an opinion handed down Tuesday.

Slatery’s opinion does not carry legal weight but it could be cited in efforts to modify the state’s gambling and fantasy sports laws, according to The Tennesseean.

In recent months, attorneys generals in states across the nation have weighed in on the legality of daily fantasy sports. The fast-growing industry has attracted legal and regulatory scrutiny since an “insider trading” scandal rocked its two largest companies in October. Attorneys general in states like Illinois and New York have ruled daily fantasy contests illegal under their gambling laws, and Nevada determined that daily fantasy companies needed a gambling license to operate in the state.

But Slatery went farther than many state attorneys general in that he also ruled that traditional season-long fantasy sports contests are games of chance that, if wagered on, violate state gambling statutes.

“Fantasy sports fall within the broad definition of ‘gambling’ under Tennessee law,” Slatery said, if they involve “an entry fee in order to win a prize.”

“While participants may use skill to select players for their teams, winning a fantasy sports contest is contingent to some degree on chance,”  he added in the decision. “Namely, the participants do not control how selected athletes perform in actuality on a given day. Athletes’ performances are affected by many fortuitous factors — weather, facilities, referees, injuries, etc.”

Season-long fantasy sports have largely avoided the legal attention the daily fantasy industry has received in recent months because they are legal under a carve-out in federal gaming law. Daily fantasy operators like DraftKings and FanDuel, the industry’s two behemoths, have argued that their contests are also the types of “games of skill” that are protected under the federal exemption.

State legislatures in states across the U.S. have also sought to address the murky legal environment around fantasy sports. Virginia and Indiana have both passed bills that legalize and regulate daily fantasy sports, and legislation is proceeding in several other states, including New Jersey.

Without similar legislation “specifically exempting fantasy sports contests from the definition of ‘gambling'” in Tennessee, Slatery wrote, “these contests constitute illegal gambling under Tennessee law.”

Tennessee’s state senate approved legislation to regulate daily fantasy sports in February, but it has not passed the state House of Representatives.

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