Legal Clarity Coming For Daily Fantasy Sports In Texas? Lawmaker Plans To Introduce New Bill

Posted on September 9, 2016

[toc]A lawmaker in Texas plans to introduce a bill that would regulate daily fantasy sports according to the Texas Tribune. If passed, it would legal clarity to an industry seeking it in one of the largest states in the union.

Texas is one of several unsettled states on the legal front for DFS; DraftKings offers real-money contests in the state, while FanDuel does not.

The good news for DFS in Texas

According to the Tribune, Rep. Richard Peña Raymond, a Democrat, has already drafted a bill “that would classify fantasy sports as games of skill, not of chance.”

Such a bill would be meant to render moot an opinion from Texas Attorney General Ken Paxton that DFS constitutes illegal gambling under state law. FanDuel exited the state for real-money contests in the wake of that opinion, after a settlement with Paxton. DraftKings, meanwhile, chose to fight the opinion in court.

Interestingly, the bill apparently was not prompted by DraftKings, FanDuel or the Fantasy Sports Trade Association. More from the Tribune:

The proposed bill was not written with the help of any fantasy sports sites, Raymond said — just input from his Laredo constituents who disagreed with the attorney general’s opinion. …

“There are just some things the government shouldn’t be sticking their nose in, and fantasy sports is one of them,” he said.

The bad news for DFS in Texas

While it’s good news that legalization of DFS is on the mind of at least one lawmaker, that legislative effort will have to wait.

How long? The Texas legislature is not back in session until the second week of January. And any legislative effort would likely take a month on the short end, and months — or longer — on the long end.

And while Texas is the birthplace of the hold’em poker game that bears its name, Texas is not a terribly liberal state for gambling activities, although it does have a lottery and Native American gaming.

Whether you believe DFS is game of skill or a form of skill-based gambling, it has been a part of the discussion in several states; it has won that debate in every state that has passed a law to date, gaining the “game of skill” designation.

In the South alone on the legislative front this year, there are success stories (Mississippi, Tennessee), and failures (Georgia, Alabama) for DFS industry lobbyists.

Texas has the backdrop of the AG opinion, but legislatures in both New York and Mississippi have already passed laws this year rendering similar opinions moot.

The backstory for DraftKings, FanDuel and DFS in Texas

Texas was not considered a legally murky state for most DFS operators until earlier this year. In January, Paxton issued his opinion, which said, in part:

Under section 47.02 of the Penal Code, a person commits an offense if he or she makes a bet on the partial or final result of a game or contest or on the performance of a participant in a game or contest. Because the outcome of games in daily fantasy sports leagues depends partially on chance, an individual’s payment of a fee to participate in such activities is a bet. Accordingly, a court would likely determine that participation in daily fantasy sports leagues is illegal gambling ‘under section 47.02 of the Penal Code.

That opinion did not lead to immediate action by either DraftKings or FanDuel, which voiced their disagreement with Paxton from the start. Both sites waited until March to act, with FanDuel pulling out of the state. Several other operators in the tier behind DraftKings and FanDuel still offer real-money contests in Texas.

Texas was actually one of the first states to consider legislation to regulate and license daily fantasy sports, back in the spring of 2015. Nothing happened with that bill beyond its introduction.

Since then, however, legislative momentum has picked up considerably elsewhere. Bills were introduced in more than half the states in the past year; eight states passed laws in 2016 that formally legalized real-money fantasy sports contests.

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Dustin Gouker

Dustin Gouker has been a sports journalist for more than 15 years, working as a reporter, editor and designer -- including stops at The Washington Post and the D.C. Examiner.

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