Alabama Attorney General Luther Strange announced Tuesday that his office has found daily fantasy sports to constitute illegal gambling and that he has issued cease and desist letters to DraftKings and FanDuel.
Strange becomes the ninth attorney general to come to a similar conclusion about the legality of DFS vis a vis state law.
What Alabama’s AG did
Strange’s office issued a press release late in the day on Tuesday, saying that DraftKings and FanDuel have until May 1 to pull out of the state.
DraftKings and FanDuel did not immediately have a statement on the developments in Alabama, nor did either company indicate their intent to continue to accept players in the state or not.
Unlike some other states, the AG did not issue a full, formal opinion on the legality of DFS. Tuesday’s press release did mirror the opinions of several other AGs that chance plays large enough of a role in DFS contests to be illegal under state law:
From the press release:
“As Attorney General, it is my duty to uphold Alabama law, including the laws against illegal gambling,” Attorney General Strange said. “Daily fantasy sports operators claim that they operate legally under Alabama law. However, paid daily fantasy sports contests are in fact illegal gambling under Alabama law.”
In Alabama, an activity constitutes illegal gambling if a person stakes something of value on a contest of chance, even when skill is involved, in order to win a prize. …
There is, of course, a measure of skill involved in creating a fantasy roster. But in the end, contestants have no control over the performance of the players on their rosters. For example, a player could fall ill before a game, be injured in pre-game warm-ups, or miss a large portion of the game due to injury or equipment failure. All of these factors, and many more, are outside the control of a fantasy sports player. Thus, the results of paid daily fantasy sports contests depend to a large degree on chance. This is the very definition of gambling under Alabama law.
The snapshot of other AG actions on DFS
Alabama is the latest of many attorney generals to weigh in on DFS; most of them have had a negative view:
- Illinois: AG Lisa Madigan tackled the issue with an advisory opinion in December that triggered a still-running court battle between her office and DFS operators.
- Nevada: An opinion from the office of AG Adam Laxalt in October came to the conclusion that DFS was gambling under state law and required a license to operate.
- New York: FanDuel and DraftKings recently reached a settlement in their ongoing court battle with New York Attorney General Eric Schneiderman in the hopes of passing a favorable law. Schneiderman, like Alabama, issued cease and desist letters.
- Texas: Earlier in January, AG Ken Paxton issued an opinion saying that the courts would likely find that DFS is illegal gambling under state law.
- Vermont: The AG’s office in the New England state declared DFS is illegal gambling under state law. There has been no sense of what, if any, action the Vermont AG might take.
- Mississippi: AG Jim Hood said DFS is illegal gambling, prompting most operators to leave the state.
- Hawaii: State AG Doug Chin opined that DFS was illegal.
- Georgia: The AG’s office said DFS was illegal gambling in response to a request from the state lottery.
- Maryland: The AG’s office said the legislature should clear up the legality of DFS, saying a law passed in 2012 possibly should have gone to referendum.
- Massachusetts: AG Maura Healey said she believe DFS is legal under state law, and recently enacted regulations for the industry.
- Rhode Island: The AG issued an opinion that DFS is legal under state law.
- Kansas: The AG’s office issued a positive opinion of DFS’ legality under a law legalizing fantasy sports in 2015.
What will DraftKings’ and FanDuel’s reaction be?
While neither DFS operator has spoken so far, what they might do is unknown as of now.
Even a few months ago, the playbook would have been to issue a statement decrying the AG’s action, and possibly fighting it in court. However, the sites have been more cooperative in recent weeks and months, reaching a settlement in New York, pulling out of Mississippi, and leaving Texas (in the case of FanDuel, only).
Alabama is the only state, other than New York, to actually issue cease and desist orders (at least that is known to the public).
Alabama is a relatively small market, with a population of 5 million, so the loss of the state would not be crippling to the industry. At the same time, losing another state obviously would not be ideal.
The legislative possibilities in Alabama
Alabama is one of more than two dozen states that have been pursing a legislative answer for legalizing and regulating DFS.
A House version of a bill was passed out of committee to the full House of the floor. After amendments and debate early in March, the bill has seen no progress in more than a month, and it never came up for an up or down vote. A Senate bill has seen no action since Febraury.
The legislature is set to adjourn in May, so there is still time to get a bill to the finish line. Indiana and Virginia have already passed laws this year to legalize DFS.