Can Casinos Apply For State Fantasy Sports Licenses And Offer Sports Betting?

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In the winter, there were a variety of bills floating around state legislatures about the legalization and regulation of the daily fantasy sports industry.

Now, several of those bills have become laws, with at least a few more likely on the way.

The questions those bills posed then are even more relevant today, as they come close to being put into action:

The answers appear to be yes in the states that have passed laws so far. Let’s look at the language, state by state:

Virginia’s DFS law and sports betting

Virginia became the first state to pass a law regulating fantasy sports in March.

The VA fantasy sports language

Here is how the state defines a “fantasy contest” in the law:

“Fantasy contest” includes any online fantasy or simulated game or contest with an entry fee in which

Applying the VA language

The language above is the core language employed by most of the DFS bills and laws in play. In order to be a “fantasy contest” in Virginia, the following conditions must be met:

  1. The prizes must be established before a contest begins.
  2. The contest can’t involve only one individual; there must be at least two individuals involved to qualify.
  3. The contest can’t involve entire teams.
  4. It can’t involve the score or point spread of a game.
  5. Outcomes must reflect “relative knowledge and skill” of participants.

Of course, these guidelines allow the traditional DFS contests offered by DraftKings, FanDuel and others, as well as other forms of DFS.

However, it’s also pretty easy to envision a contest that can meet these conditions that look nothing like DFS. There is nothing that says a fantasy contest needs to a peer-to-peer game, meaning it can be house-banked.

A hypothetical sports bet the VA law could allow

Here is a bet someone with a fantasy sports license in Virginia could hypothetically offer, based on the language in the bill:

Which quarterback will throw for more yards in the Super Bowl, Peyton Manning or Cam NewtonPick a QB, wager $100 to win $200.

This “contest” satisfies these requirements of the bill:

In this hypothetical, the only possible sticking point is the “relative knowledge and skill” provision in the bill. However, is it realistic to expect states to parse how much skill is involved in any contest, as long as it meets the other provisions of the bill?

That could become a slippery slope, not to mention that the “knowledge and skill” provision is so vague as to seemingly cover anything that is not based on total luck.

Another hypothetical bet, not about sports

Additionally, the law doesn’t apply to just sporting events. The law simply says contests must be based on “accumulated statistical results of the performance of individuals, including athletes in the case of sports events.”

In theory, the law allows non-sports fantasy contests (e.g. beauty contests or spelling bees). For example:

How many words will Johnny Smith and Bobby Jones spell correctly in the 5th grade spelling bee? Wager $100 to predict they will spell more than 10 words correctly, win $200 if 11 or more words are spelled correctly.

Like the sports example above, the prize is known in advance, and it involves more than one individual.

Again, skill could be debated. But couldn’t you look at results from the fourth grade spelling bee? Or ask Johnny and Bobby’s parents how much they are studying for the spelling bee?

This example is obviously presented tongue in cheek, but it makes the point that the law could, in theory, authorize betting on almost anything.

The other states with DFS laws

Is the language any different in the other three states with laws?

Indiana and DFS

Indiana was the second state to pass a DFS regulatory law. The only difference between the language in Virginia and Indiana is a slightly narrower definition of what  a “paid fantasy sports game” is.

In Indiana, a game cannot be based on any college or high school sports. It cannot involve a horse race, unless authorized by the state’s horse racing commission.

Otherwise, Indiana’s language is not materially different.

Tennessee and DFS

The Tennessee law passed this year was a bit more rigorous in defining fantasy sports. Of note is this passage of the law in describing what is authorized:

“Fantasy sports contest”:

Means an online simulated game:

In which players are subject to an entry fee to assemble imaginary teams of athletes

While not impossible, it would be difficult to see how something resembling a straight proposition bet would be allowed. However, a “team” of fantasy players might only have to include two athletes.

Mississippi and DFS

Mississippi is the newest state to enact a DFS regulatory law.

The Mississippi language is not materially different from Virginia’s on defining a contest, so the “sports betting” scenario in play in this state, as well.

So would anyone try to offer sports betting?

That of course, is the question that comes out of all of the above. Are these just hypothetical scenarios about sports betting that could be authorized, or ones that could happen in the real world?

The entire DFS industry sprung up because of the federal carveout in the Unlawful Internet Gambling Enforcement Act and existed in a legal gray area in a number of states. Given that, it’s difficult to believe no one would try to exploit the language of explicit state laws to offer something that approximates sports prop bets.

Could a casino or online sportsbook in a given state attempt to offer sports bets under the guise of fantasy sports? It’s at least possible.

“We have been following the developments with the daily fantasy sports betting bills in various states,” William Hill US CEO Joe Asher told Legal Sports Report. “We’ve been reviewing the language of the bills, trying to determine their interplay with PASPA, and considering our options. We’ll see how it all plays out.”

Would anyone try to stop it?

That’s the other big question, if an attempt at offering sports betting on players arose. As discussed, the states face a problem in saying “x” is OK and “y” is not if a “contest” being offered meets all of a law’s provisions, and skill is the only element brought into question.

At the federal level, the offering of something that is the equivalent of a sports bet could trigger a PASPA violation.

However, would a professional sports league, the NCAA, the DOJ or anyone else try to bring a suit against a state? The first two seem like a stretch, but not out of the realm of possibility:

A more likely scenario — if  an entity does try to offer sports betting under a DFS law — would be to revisit loose language in the laws that allows for it.