Draft Kings and Fan Duel Illegal in Texas According to AG

fansportsgmbOn January 19, 2015, the Texas Attorney General published an opinion stating that online fantasy sports gambling is illegal in Texas. Those of you into fantasy sports can rest easy if you gamble privately among your friends. Office pools are technically legal as long as it is a private affair. However, the Texas Attorney General feels that online fantasy sports betting is illegal.

The AG’s opinion was prompted by recent rulings in several states about whether fantasy gambling sites were illegal. Texas Representative Myra Crownover submitted a request for an opinion from the Texas Attorney General’s office on November 12, 2015. As many of you know, Texas is generally very conservative when it comes to gambling. It prohibits most types of gambling and heavily restricts those it allows.

Louisiana, Massachusetts and New York have already attempted to dissuade online gamblers. Nevada has demanded that the companies behind Draft Kings and Fan Duel acquire the necessary licenses.

The act of paying the fee to play the fantasy game is what makes it illegal according to my understanding of the Texas Attorney General’s opinion. Because Draft Kings and Fan Duel make money from the bets that are placed, their activity becomes illegal according to the opinion. The same opinion opined that wagering in private fantasy sports games are also illegal, those wagering in those games can defend themselves by arguing that no one, besides the winner “derives an economic benefit.”

The internet continues to fundamentally change the way we live our lives. Online fantasy gambling, Uber-type business disrupters change how make money today. As I have written before, governments are ill-equipped to handle the evolution of human business and interaction that is being driven by the internet.

The underlining problem is one of jurisdiction. Local and state governments can enforce their laws on those that reside within their geographic boundaries. But what about those that are outside of their jurisdictions?

This is the sticky problem that has led to various haphazard rulings, prosecutions and idiotic posturing.

The Texas Attorney General may opine that online fantasy games are illegal but in the meantime those behind Draft Kings and Fan Duel continue to rake in the money from Texas gamblers. By the time the dust settles, the early investors will either be sitting on an online fantasy gaming empire or the smart ones would have cashed out by the time the Texas Rangers get around to figuring out how to bring them to justice.

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