Alabama and Tennessee have become the most recent states to weigh in on the legality of daily fantasy sports (DFS) contests. Last week, the attorneys general of the two states issued opinions declaring such contests to be illegal in their respective states. The Alabama Attorney General has ordered DraftKings and FanDuel, the two largest DFS operators, to shut down. And, the long-awaited fantasy baseball season is in jeopardy of a rainout in Tennessee.
On Tuesday, Alabama Attorney General Luther Strange issued a press release announcing his opinion that paid DFS contests constitute illegal gambling under Alabama law. While Strange’s press release is not a formal opinion, it makes clear the rationale behind his stance – his belief that chance plays a large enough role in DFS contests to make them illegal. Alabama is a “material element” state, where a contest is considered gambling if chance plays a material element in the outcome. The element of chance, Strange opines, stems from factors such as illness and injury that outweigh the “measure of skill involved in creating a fantasy roster.”
On the heels of Attorney General Strange’s announcement, Tennessee Attorney General Herbert Slatery released his opinion that fantasy sports contests constitute illegal gambling because they are “contingent on some degree of chance.” Slatery’s opinion is sweeping in its scope. Rather than limiting his analysis to daily products, Slatery has declared that all fantasy sports contests are illegal. This determination was largely based on the fact that Tennessee is an “any chance” jurisdiction, i.e., any game played for consideration in which there is “any degree” of chance will be considered gambling. The Tennessee opinion implicitly raises serious questions as to whether season-long fantasy sports games are now at risk.
Should fantasy sports operators leave the Alabama and Tennessee markets, it may only be temporary. Attorney General Slatery essentially ended his opinion by calling on the Tennessee legislature to deal with the fantasy sports issue, noting that it “has the power to exclude from the definition of ‘gambling’ any fantasy sports contest” not prohibited by the state and federal constitutions. Both Alabama and Tennessee have pending legislation that would define DFS as games of skill and regulate them. Tennessee Senate Bill 2109 authorizes a licensing structure to allow for certain fantasy sports contests and has already passed the Tennessee Senate.
The legality of DFS has been the subject of significant legal and legislative attention in recent months. New York Attorney General Eric Schneiderman’s lawsuit against DraftKings and FanDuel, the industry leaders, has made national headlines, as have the recently passed Virginia and Indiana laws that made them the first states to explicitly declare DFS to be legal. Meanwhile, nearly half of the states have pending legislation that would expressly legalize DFS contests. Despite the legislative momentum to clarify the legal status of DFS, Strange and Slatery have joined a group of attorneys general that have come out against the games based on their reading of their states’ gambling statutes.