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The Michigan Gaming Control Board believes that daily fantasy sports are not legal in the state, according to a report from GamblingCompliance (paywall), following the introduction of a fantasy bill introduced last week.
MGCB executive director Rick Kalm said he believes playing daily fantasy sports for real money is “illegal under current Michigan law,” according to GC.
Before today, nearly all DFS operators accepted players from Michigan, while generally excluding players from five states (Arizona, Washington, Montana, Iowa and Louisiana).
Losing access to players in Michigan would be a fairly big blow for DFS operators. Its population is about 10 million, the 10th most populous state in the U.S.
It’s unknown if this news will affect which DFS sites operate in the state. Legal Sports Report has reached out to several major DFS sites for comment.
The GC report and the comments from Kalm come on the heels of a fantasy sports bill being introduced last week by Sen. Curtis Hertel. Hertel’s bill seeks to exclude fantasy sports from gaming law in the state, making it legal as a “game of skill.”
In the wake of that news last week, the Fantasy Sports Trade Association said it had hired a lobbyist in Michigan.
Whether or not the MGCB opinion has an impact on whether people can play DFS in Michigan, or whether sites can operate there, is not determined directly by the MGCB, however. It would be up to the state’s attorney general whether to prosecute sites or players.
The opinion of the MGCB could be used as an argument in legal action to support the idea that DFS is illegal, however, according to Marc Edelman, a legal expert on daily fantasy sports.
So far, the attorney general’s office has not targeted DFS in the state. The MGCB’s determination is certainly a red flag for both operators and users, however.
Without more details from the Gaming Control Board, it’s difficult to know exactly what part of the law that body believes DFS runs afoul of, although it likely hinges on its status as a “skill game.”
Edelman told Legal Sports Report that the determination by the MGCB isn’t surprising.
“Michigan is not among the highest risk states such as Arizona, Louisiana or Tennessee, but but without a formal study showing the ratio of skill to chance in daily fantasy sports, it is really a tough legal issue,” Edelman said. “In reality, the legality probably varies by game format, with some formats on the right side of the line and others on the wrong side.”
Edelman wrote a paper in 2011 that lumped Michigan into a group of states with some fantasy sports concerns under state law.
…states such as Delaware, Kansas, Michigan, Ohio, Wisconsin, Washington, and Vermont, fantasy sports encounter a greater risk of liability because courts in these states have adopted the true contract-law meaning of the word “consideration.” Thus, in these states, the gambling law element of “consideration” is met, even absent an entry fee, so long as the contest participant expends substantial time or effort that benefits the contest’s host in some way. Stated in terms of fantasy sports, even if a host site offers a free fantasy sports game, the game may run afoul of state gambling law if the elements of “chance” and “reward” are both met.
The brewing fight in Michigan is shaping up much like one in Kansas earlier this year. In that state, the Kansas Racing and Gaming Commission also declared that it believed DFS was illegal under state law.
However, in Kansas, that KRGC determination came before a bill that sought to legalize daily fantasy sports. That bill passed through the legislature and was signed into law by the governor with relatively little opposition.
Daily fantasy sports also was a gray area in Kansas because of a different portion of state law; it was considered an “illegal lottery” by the KRGC.
Several states have considered fantasy sports legislation this year, although Kansas is the only state to pass a bill on the DFS front.
The two biggest DFS sites have a little more at state in Michigan than everyone else. The major professional sports teams have deals in place with one of the two sites:
It seems unlikely that FanDuel and DraftKings will be pulling out of the state, given these relationships, without a truly imminent threat.
The Nevada Gaming Control Board is currently undergoing its own “legal analysis” of daily fantasy sports.
The outcome of that analysis could very well have a negative impact on the DFS industry in the state. It’s even possible that the proclamation by the NGCB stirred its Michigan counterpart to action.
Is Michigan step two of a groundswell of state gaming boards and attorneys general taking a closer look at DFS, or just a blip on the radar? That will be an interesting matter to watch as scrutiny of the DFS industry expands.