Finally An End To Years Of Madness In The Illinois DFS Saga

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Illinois DFS

The duration of time was 1,576 days — four years, three months and 24 days — between the opinion and the decision.

The 2015 opinion by Illinois Attorney General Lisa Madigan concluded that daily fantasy sports (DFS) violated state gambling law. The 2020 decision by the Illinois Supreme Court determined at least some daily fantasy contests are games of skill and are, therefore, permissible within the Prairie State.

The Illinois Supreme Court decision reversing part of the attorney general’s opinion comes on the heels of the state legalizing sports betting last year. It created an interesting twist and initially contained a “penalty box” for companies that acted in violation of state law during the DFS salad days, which was presumed to mean in contravention of Madigan’s opinion.

The penalty box provision was perceived to impose an 18-month waiting period on daily fantasy turned gambling operators that allegedly offered illegal contests in the state before being allowed to compete in the mobile sports betting market. The penalty box later was softened to a mobile blackout.

While the opinion was perceived as the law of the land by some daily fantasy operators for more than four years, the opinion was partially overturned by a majority of the Illinois Supreme Court on April 16.

Flashback to Illinois AG opinion

Two days before Christmas in 2015, Madigan authored an opinion titledSports and Gaming: Daily Fantasy Sports Contests as Gambling.

The first two sentences left little doubt as to the legal status of FanDuel and DraftKings’ contests in the eyes of the attorney general.

You have inquired whether daily fantasy sports contests offered by FanDuel and DraftKings (collectively Contest Organizers) constitute “gambling” under Illinois law. For the reasons stated below, it is my opinion that the contests in question constitute illegal gambling …`

Different than season-long contests

Madigan’s opinion noted that the Illinois Criminal Code “prohibits the playing of both ‘games of chance or skill’ for money.”

While the statute contains an exception to the prohibition, Madigan’s opinion concluded that the allowance of games that are contests of skill, speed, strength, or endurance was inapplicable here.

The opinion contended that daily fantasy contest entrants were not the “actual contestants in a bona fide contest.” Instead, the phrase would have applied to the real-world athletes competing in professional sports.

The Illinois Attorney General’s opinion cast a dark shadow over the state’s DFS landscape. While both FanDuel and DraftKings appeared to continue to operate with little in the way of consequence until the penalty-box provision, the opinion left uncertainty over the legal landscape of the state. 

That is, until the Illinois Supreme Court provided some clarity last week.

Supreme Court case in review

The Illinois Supreme Court issued a decision last week in a case that flew under the radar for many. Dew-Becker v. Wu centered on whether the loser of a head-to-head daily fantasy contest could recover lost money under the Loss Recover Act.

A quick overview

In April 2016, Colin Dew-Becker filed a complaint against Andrew Wu after Dew-Becker lost $100 to Wu in a head-to-head contest on FanDuel.

The complaint contended that DFS was unlawful gambling and, thereby, the plaintiff was entitled to recover the money. Illinois permits “the loser of certain illegal bets to seek recovery from the winner.”

At the end of a bench trial, the circuit court ruled in favor of the defendant, in part, because the law does not permit recovery when a third party is involved in the gambling transaction. In this case, it’s FanDuel.

The appeals court ruled similarly, noting the presence of a third-party made the provision inapplicable.

The decision

The Supreme Court’s majority held that:

The only “direct” connection required under Section 28-8(a) is that one person loses at gambling to another. Nothing in the statute states that a third party’s help in conducting the gambling eliminates the plaintiff’s right to recovery.

But the majority went further. While the court did not agree with the appellate court’s rationale, they agreed with their conclusion.

The Chief Justice of the Illinois Supreme Court wrote:

Although we do not find the appellate court’s reasoning persuasive, we nevertheless agree that the judgment of the appellate court should be affirmed because the DFS contest at issue here was not gambling …. In this case, there is no question that when (the) plaintiff and defendant entered into the DFS contest, they were “actual contestants” who had before them a possible “prize,” “award” or “compensation.”

The majority looked to “recent research” to find that skill is the predominant factor in determining the result of head-to-head daily fantasy contests. As a result, the court determined that the plaintiff was not engaged in gambling and thus, could not recover gambling losses.

Dissenting view

Justice Karmeier of the Illinois Supreme Court, however, argued that while in agreement on the application of the predominate factor test, the majority has gone outside the parties’ submissions and conducted their own determinations that daily fantasy is a game of skill.

Karmeier further argued that scientific, statistical studies should not be wholly dispositive as qualitative factors should also be a consideration.

Expert reactions to the decision

Marc Edelman, a professor of law at Baruch College and an expert on fantasy sports and gaming, was heavily cited by the majority opinion. He told Legal Sports Report:

Judge Anne Burke’s Supreme Court ruling in Dew-Becker v. Wu is the most sophisticated legal opinion to date written about daily fantasy sports. Instead of creating legal fictions and ruling on a technicality, she cut to the heart of an issue that has been so much at play in DFS, whether these contests constituted legal games of skill.

Moreover, she reached her conclusions by looking at many of the leading published academic articles in the field, and not simply the proclamations of party advocates and self-promoters.

Edelman further commented:

Prior to this ruling, there was a marked unfairness in the Illinois daily fantasy sports marketplace.

Earnest companies that followed the state attorney general’s December 2015 opinion have continued not to offer services in the state. However, the very companies warned to exit, ultimately stayed in business without facing legal challenges.

Based on the Illinois Supreme Court’s civil decision on Friday, we now have something closer to legal certainty about whether operating daily fantasy sports is legal in the state of Illinois. This result invites earnest companies to enter the market.

This conclusion came more than three years too late for some of the more earnest competitors who followed the attorney general’s original letter. However, it’s a blessing for those many companies that are doing business elsewhere and wish to add Illinois to their states of operation.

Steve Silver is an adjunct professor at the University of Maine School of Law and associate at Ogletree Deakins. Silver told LSR that even with the Illinois Supreme Court’s decision in place, there are still questions that remain:

The majority opinion makes it clear that the issue before it was only head-to-head. So, the question now is, what about other types of DFS contests? How would this same court analyze a Millionaire Maker-type of a contest with 100,000 participants where the winner enters the maximum 150 lineups?

What to make of this?

The Dew-Becker v. Wu decision will undoubtedly be cheered by major operators like FanDuel and DraftKings.

However, it remains to be seen if the decision will have any impact on the sports gambling penalty-box provisions. 

While the full effect of the decision remains to be seen, Illinois will likely be viewed more favorably by daily fantasy operators even if the ruling is limited to head-to-head contests.