A full 18 months after being asked to issue it, California Attorney General Rob Bonta’s office has released its highly anticipated opinion on the legality of daily fantasy sports (DFS) in the state.
As predicted, the opinion found no version of DFS to be in compliance with state law.
Critics are already coming to the fore about the office’s stance, including the state’s highest governing official. Whether or not there is room for a compromise remains to be seen, but there certainly is an appetite for one from stakeholders outside the DFS industry.
Here’s the rundown on the fallout and the response to the opinion, as well as a full breakdown of what it said.
What was the CA AG’s overall conclusion?
As expected, the opinion from Deputy AG Karim J. Kentfield took the position that every form of DFS offered in the state is in violation of California law relating to sports wagering.
“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. Such games constitute wagering on sports in violation of Penal Code section 337a,” the opinion noted straight away.
While some of the public feedback suggested that the games violated both lottery and sports betting laws on the books, the opinion was very clear that it did not explore or cover the scope of the lottery violation.
“We conclude that daily fantasy sports games constitute sports wagering and therefore violate section 337a. While we are unable to conclude whether such games also violate the lottery prohibition — because that analysis would require making factual determinations outside the scope of an Attorney General legal opinion — it is unnecessary to resolve the latter question in light of our conclusion that California law independently prohibits such games under section 337a.”
Part of the argument Underdog made to the California Superior Court in its attempt to block the opinion was that Bonta’s office did not have the scope to even answer the question because it would require making factual determinations. That’s something Kentfield himself mentioned with regard to one aspect of the question, but not the other.
What happens next for California DFS?
As the judge noted in denying Underdog’s attempted blocking of this opinion, this opinion does not actually change the law. Underdog stated on Wednesday that it will continue to operate in the state and no other fantasy operators have indicated a plan to leave yet either.
A statement from the Coalition for Fantasy Sports Executive Director JT Foley was quick to take up Newsom’s call.
“We agree with Governor Newsom — AG Bonta got it wrong. As the Court said yesterday, this opinion ‘does not effect any change in law’ and does ‘not carry the weight of law.’ The law has not changed, a fact the last two Attorneys General, Kamala Harris and Xavier Becerra, recognized as they specifically declined any similar action. We are hopeful the Attorney General heeds the Governor’s call to find a constructive solution that preserves the games that California sports fans love.”
Coalition members include Underdog and PrizePicks.
A FanDuel spokesperson offered a similar statement on the decision to SBC Americas:
“We look forward to meeting with the Attorney General’s office to talk through our next steps.”
DraftKings offered the following response, confirming plans to remain live in the state:
“DraftKings respectfully disagrees with the interpretation expressed with respect to peer-to-peer fantasy sports contests in the non-binding advisory opinion issued by the Attorney General of California. We believe peer-to-peer fantasy sports contests, including Salary Cap, Pick 6 and Best Ball, are legal in California, and we intend to continue offering them — as we have done without challenge or issue for over 13 years. Notably, the overwhelming body of law from 24 states and Congress confirms that fantasy sports contests are legal games of skill. In addition, the highest courts in Illinois and New York previously held that peer-to-peer fantasy sports contests are legal games of skill. We intend to work with stakeholders, including the Office of the Attorney General, to try to find an amicable resolution.”
The Fantasy Sports and Gaming Association (FSGA) issued a lengthy statement as well condemning the opinion.
“The FSGA maintains that paid fantasy sports contests are legal games of skill under California law, and this view is supported by 26 states that have confirmed fantasy sports are legal games of skill and not gambling. In these instances – whether by legislation, AG opinions (West Virginia, Rhode Island), or state supreme court decisions (New York, Illinois) – the legality is clear.”
SBC Americas reached out to a range of operators and trade groups regarding the decision and will update this story as responses come in.
Newsom wants a DFS compromise
Shortly after the opinion dropped, California Gov. Gavin Newsom‘s office issued a statement to local outlet KCRA making it clear his office does not agree with the attorney general’s office’s take on the issue:
“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,” said Newsom spokesperson Izzy Gardon.
Tribes want Bonta’s office to take action
After the opinion came out, the California Nations Indian Gaming Association (CNIGA) issued a statement of its own from Chairman James Siva. They applauded the opinion, but Siva wants enforcement to follow.
“While the California Nations Indian Gaming Association (CNIGA) commends Attorney General Rob Bonta for standing up for the rule of law in California, it is also very clear that California has long turned a blind eye to illegal gambling—at the direct expense of tribal governments. Untold millions if not billions have been illegally wagered over the past decade. Where is the enforcement? Where is the accountability? It is now imperative that the state back up this legal opinion with strong enforcement and that lawbreakers be held to account.”
In its petition to the California Superior Court to block the opinion, Underdog cautioned that Bonta’s office had informed operators that the plan was to use the opinion to force operators out of the state, even if the opinion is not a change in the law.
What is in the California DFS opinion?
For those curious why the opinion reached the conclusions it did about fantasy, here is a breakdown of how it addressed each vertical:
Pick’em fantasy
The opinion divides its time picking apart pick’em and draft-style games and whether or not they are in violation of the law. The ultimate conclusion was that both are, as the opinion takes the stance many opponents of pick’em have taken that that particular version of fantasy is a de facto parlay wager.
“As with many traditional sportsbook bets, pick’em players place a bilateral wager against the game operator,” the opinion noted, alluding to the outcome of either winning or losing based on whether or not an event happened.
“Indeed, pick’em appears materially indistinguishable from a classic form of sports wagering: a ‘parlay’.”
The opinion mentioned several arguments fantasy operators made about their pick’em product, but Bonta’s office was not swayed by any of them.
Kentfield outright dismissed the predominance of skill argument, noting that the skill debate may apply to whether or not the games violate lotteries, but does not apply to the state’s penal code 337a concerning sports wagering, as skill is not referenced as an exemption.
Operators did suggest that the phrasing “result of a sporting event” used in 337a applied purely to who won or lost, not statistical performances within the game, but the AG’s office disagreed with that too.
Kentfield argued there are a wide range of results in a given sporting event at both the individual and team level. He also suggested if the operator’s interpretation of result were correct, all prop bets and in-game betting would be allowed under the law.
Proponents of pick’em also invoked the Unlawful Internet Gambling Enforcement Act (UIGEA), which has a specific carveout for fantasy. However, UIGEA is a federal law about payment processing, so the opinion said it has no bearing on the interpretation of state law.
Kentfield felt pick’em’s violation of the law was so obvious that there was no ambiguity in how to read the law, so he did not believe operators were owed any sort of leniency on enforcement.
Peer-to-peer pick’em
While many states have been satisfied with pick’em switching from an against-the-house to peer-to-peer format, that appears to have no impact on how Bonta’s office views the legality of the game.
Surprisingly, peer-to-peer pick’em games merit but a single mention, and even that doesn’t come in the actual text of the opinion but in footnote:
“We are told that some operators offer pick’em as a peer-to-peer competition, in which participants compete against each other to make the highest number of correct predictions. In our view, this version of pick’em also constitutes sports wagering because the entry fees satisfy the definition of a “bet” or “wager” under section 337a,” it read.
Draft-style fantasy
Since there are different legal arguments regarding draft-style fantasy, the opinion analyzed it separately from pick’em.
Most notably, the argument is that the buy-in is a fee to participate in a contest of skill where your performance is weighed against other contestants, similar to a bowling tournament or a spelling bee. Since the individuals are wagering on their own performance, operators argue it isn’t gambling.
Kentfield disagreed, and cited similar takes from AG opinions put forth in West Virginia and Mississippi.
“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.”
Moreover, even if it is a contest based on an individual’s skill, it nonetheless still entails the outcome of the performances of others, which the opinion found problematic.
“We conclude that draft style games do not fall within the contest-participant exception because players do not participate in sporting events but wager on the athletic performance of others.”
The opinion also looked back at the root of penal code 337a, which stemmed from concern that too many people were losing life-changing sums of money betting on horse racing. The concerns about addiction and financial loss, in Kentfield’s opinion, were particular disconcerting when it came to draft-style fantasy since users could enter hundreds of times into a single contest.
In a previous California case, Los Angeles Turf Club v. Horse Racing Labs, LLC, the state court concluded that a fantasy horse racing contest were bets, which weighed heavily into the opinion.
Another citation came from the New York Court of Appeals case White vs. Cuomo, which challenged the state’s law legalizing DFS. However, instead of citing the majority opinion that agreed it was, Kentfield cited the dissenting opinion of Justice Rowan Wilson, who dissented with the decision that DFS was a contest of skill, not wagering.
Wilson agreed there was skill involved, but noted that skill was “a skill in betting.”
Season-long fantasy leagues
The question posed by Sen. Scott Wilks in his question specifically referenced “daily fantasy sports”, so the subject of recreational season-long leagues was not within the scope of the question.
However, those who reside in California and participate in season-long fantasy probably don’t love the conclusions in the opinion considering none of them mentioned the daily concept as integral to a conclusion. Moreover, it made no exception for peer-to-peer pick’em.
While there is arguably no appetite for a lawmaker to request an opinion on season-long fantasy leagues, it is entirely possible that if one were to be issued, several of the same arguments would come into play.
