All DFS contests in California are illegal, according to the opinion released Thursday by Atty. Gen. Rob Bonta.
The opinion could throw a wrench into a market where many daily fantasy sports operators are active and building up player databases for the eventual legalization of California sports betting.
Bonta’s office started looking into the legality of DFS in October 2023 at the request of former Sen. Scott Wilk. Local outlet KCRA-TV reported Monday the opinion would be released by Thursday.
The announcement comes after a lawsuit by Underdog in Sacramento looking for a temporary restraining order to prevent Bonta from releasing the opinion was not granted.
Governor disagrees with opinion
A spokesperson for Gov. Gavin Newsome told KCRA-TV the governor hopes the path forward includes collaboration with the operators:
“The Attorney General, in his independent capacity, issued this opinion — not the Governor’s office. While the Governor does not agree with the outcome, he welcomes a constructive path forward in collaboration with all stakeholders.”
Details from AG opinion
The opinion confirmed that both pick’em style and draft-style DFS contests are illegal under state law.
“Yes, California law prohibits the operation of daily fantasy sports games with players physically located within California, regardless of where the operators and associated technology are located,” reads the opinion. “… We conclude that daily fantasy sports games, including both pick’em and draft style games, are prohibited by section 337a because they involve betting on sporting events.”
Section 337a of the penal code says it is a crime if a person:
[l]ays, makes, offers or accepts any bet or bets, or wager or wagers, upon the result, or purported result, of any trial, or purported trial, or contest, or purported contest, of skill, speed or power of endurance of person or animal, or between persons, animals, or mechanical apparatus.
California AG ‘not persuaded’ by pick’em arguments
The ruling said it falls in line with what out-of-state regulators in Arizona, Florida, Virginia and Wyoming have said: pick’em DFS is a form of parlay betting.
“The pick’em operators offer several arguments that section 337a does not apply, but we are not persuaded. First, the operators contend that skill predominates over chance in pick’em—that is, that success in pick’em depends more on skill and judgment than luck or chance. As discussed below, this argument is directly relevant to a lottery analysis: for a game to be prohibited as a lottery under California law, chance must predominate over skill.
But that is not a requirement for a “bet” or “wager” under section 337a: the California Supreme Court has explained that, “unlike a lottery,” betting or wagering “may involve skill or judgment.” The operators have not cited a single authority construing section 337a(a)(6) to require that chance predominates.
Opinion: Draft style DFS is betting in California, too
The AG’s office found “nothing in case law” to alter its opinion that draft style DFS is also sports betting.
The game entry fees satisfy the definition of a “bet” or “wager” because players “promise[] to give money” based on “the determination of an uncertain or unascertained event” (the sports competitions) “in a particular way” (the relative aggregate performance of each player’s selected team of athletes).
As with pick’em, each player’s financial success depends on the outcome of the underlying sports games. The sports games themselves constitute “contest[s] . . . of skill, speed or power of endurance . . . between persons.” And players accrue fantasy points based on the game “result[s],” namely each athlete’s in-game performance.
Here is what falls under California DFS ban
Under the attorney general’s opinion, every type of DFS game is now illegal:
- Pick’em, which is offered by multiple companies including DraftKings, FanDuel, PrizePicks and Underdog. There are two distinct versions of the parlay-style games where contestants select between two and six players and stats. PrizePicks and Underdog both offered contests against the house in California at the beginning of the week, but PrizePicks switched to its peer-to-peer model on Wednesday. DraftKings only allows peer-to-peer in California while FanDuel does not offer its pick’em game in the state.
- Standard daily fantasy contests. What was once the bread and butter for DraftKings and FanDuel is now an afterthought as it compares to sports betting. Attempting to save DFS may not be worth it if it upsets their future sports betting partners: the gaming tribes in California.
What are the next steps for California DFS ban?
Bonta’s office releasing the opinion that all DFS contests are illegal does not do much on its own.
There will need to be some sort of action, but issuing cease-and-desists may not be enough. According to the Sacramento Superior Court, an “Attorney General’s issuance of an opinion of pursuant to Government Code section 12519 does not effect any change in the law.”
With that in mind, an Underdog spokesperson told LSR the company looks forward to “continuing to offer our fantasy contests in California.”
The most likely outcome is a lawsuit that forces a decision on the legality of daily fantasy sports contests.
Could there be no enforcement?
There is always a chance that this opinion would not lead to any action from the attorney general’s office. That probability seems slim, though, considering how high profile the issue is and the fact that California’s tribal gaming industry is in favor of the ban.
If there is no action, operators could continue to offer contests, but there are multiple factors that could be in flux. A DFS company might want to keep offering contests in California but could have a hard time if a key supplier, like a geolocation, KYC or payment provider, decide they do not want to operate in the state.
