THE BLOG
06/17/2016 09:18 am ET Updated Jun 18, 2017

The Legal Difficulties of Fantasy Sports

Dozens of stories and controversial topics have strewn news channels and the Internet over the past year regarding fantasy sports. In most cases, fantasy sports leagues are based off of online platforms where money is paid to participate. It is a game of chance, not of skill, which technically defines playing fantasy sports online as gambling. A wager, especially when odds are included, constitutes gambling.

Fantasy Football is Legal

Right out of the gate, fantasy football is so confusing. The thing about it is though, it's perfectly legal - at least in the government's eyes. Not all fantasy football websites require money to participate. There are roughly 30.6 million fantasy sports players and 74-percent of them prefer no-cash platforms. That leaves only 26-percent of fantasy sports players that spend money in hopes of winning more.

Internal Schemes

Some have claimed that fantasy sports leagues are rigged. That is not necessarily the case. In one instance, a DraftKings employee leaked information regarding the selected athletes for fantasy football games. Given that the information was revealed, the employee won a sum of $350,000 at another fantasy sports website, FanDuel.

Variety of Fantasy Sports Leagues Available

There is a fantasy league for nearly every sport played worldwide. Football, baseball and U.S. soccer are the most popular. Betting on horse races and fantasy horse racing leagues are gaining in popularity and also fall into the legal category of fantasy sports. Odds are placed on horses such as 3 to 1, 5 to 1 and so on. If the horse wins and the bet was placed properly at 5 to 1 odds, the winner gets five times the amount of their bet.

Federal Law Restricting Internet Gambling

The federal government has kind of made itself out to be a hypocrite here. It restricts Internet gambling, but does not include fantasy sports in the guidelines. The Federal Unlawful Internet Gambling and Enforcement Act (UIGEA) does not include provisions on a federal level. Essentially, the government has left the choice up to each individual states. Based upon each state's regulations, fantasy sports leagues are either legally allowed with money exchanged or are banned entirely.

States Banning Online Fantasy Sports Forums

Individual states are banning fantasy sports forums like FanDuel and DraftKings as they see these as online gambling schemes. States do have the right to ban specific types of applications, websites and businesses, from being legal. The government does respect states' rights. The websites have had to include new disclosures stating which U.S. states have banned the use of their services, warning residents that their accounts may be restricted to non-cash play only or no access at all.

Solicited Incentives

Both FanDuel and DraftKings combined have a strong hold of 85-percent of the daily fantasy sports market. These companies both used advertising to solicit members, and entice new membership signups, with the potential to win big amounts of cash for daily play. Major entities like Google support these websites and allow their advertisements. Some advertisements are sponsored by major brands. The incentives may breach existing regulations regarding rewards for the gray area of federal restrictions on Internet gambling. There is a great deal of controversy stemming around the fact that placing a bet or buying into a game where the odds are based on the income, a game of chance, is by all means of the term - gambling.

Risk of Gambling Addiction

An often untouched subject is the risk of obtaining a gambling addiction problem from using these websites. Some claim that the psychological justification of it being legal makes it okay in the minds of those with gambling problems. In some cases, lawsuits may arise due to warnings not being made clear on these websites cautioning users to spend their money wisely and only spend what they can afford to lose. Although it may seem like common sense to most, in the mind of a gambling addict, if it does not say it is gambling they justify it as being okay.

Bottom Line

Fantasy sports leagues are fun. Many are among groups of friends and co-workers, just on paper privately. Those types of setups are not really scrutinized by the government due to it being a friendly game among friends. It is important to research the fees associated with using the services and the average cost of participation. Fees vary, as do the odds of winning. You should also keep in mind that fantasy leagues, even if you have the perfect team in-play, does not guarantee you a win - they are merely games of chance.