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California Attorney General Rob Bonta dealt a major blow to fantasy sports operators on Thursday (July 3) by releasing a long-awaited opinion declaring that state law prohibits all daily fantasy sports contests.
Reports of the unfavorable opinion first emerged last week from Sacramento TV station KCRA, and following an unsuccessful attempt from Underdog Sports to block its release through an injunction a state court, Bonta released the opinion Thursday afternoon.
In the opinion, Bonta's office concludes that “daily fantasy sports games, including both pick’em and draft style games, are prohibited by section 337a [of the California Penal Code] because they involve betting on sporting events.”
The referenced section of the state’s penal code prohibits anyone who “lays, makes, offers or accepts any bet or bets, or wager or wagers, upon the result, or purported result, of any trial, or purported trial, or contest, or purported contest, of skill, speed or power of endurance of person or animal, or between persons, animals, or mechanical apparatus.”
Using that definition, the opinion argues that players in both pick’em and draft-style daily fantasy contests make “bets” on sporting events.
In the case of pick’em games, popularized by companies such as Underdog and PrizePicks, Bonta rejected an argument from operators that skill is predominant over chance in the games, finding that the law does not specify that chance must prevail over skill for an activity to be considered gambling.
“Rather, the essential requirement of a "bet" or "wager" is that participants win or lose based on the outcome of an uncertain future event, such as a sports competition, even if skilled bettors consistently come out ahead,” the opinion states.
Bonta also rejected arguments that the statute only applies to the result of a sporting event, saying that proposition-style events such as over/unders of statistics also apply.
“By one estimate, in-game proposition betting — such as predicting the result of the next play — may soon account for a majority of online sportsbook revenues,” Bonta wrote. “In our view, if the legislature had intended to allow such an enormous category of traditional sports wagering, it would have done so more clearly.”
The opinion also cited out-of-state regulators that have reached similar conclusions on pick’em style games being a form of sports wagering, referencing actions in Virginia, Arizona, Wyoming and Florida and adding that California officials “are not aware of any out-of-state regulator to reach a contrary conclusion.”
However, Bonta’s opinion also applies more broadly to the more traditional style of daily fantasy popularized by FanDuel and DraftKings.
In those traditional daily fantasy games, Bonta found that 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.”
“As with pick’em, each player’s financial success depends on the outcome of the underlying sports games.” Bonta found.
The conclusion, the opinion says, is “again consistent with the view of out-of state regulators,” citing opinions from attorneys general in West Virginia and Mississippi.
Although some two-dozen states have amended their laws to permit daily fantasy sports, the policy decision does not undercut the reasoning.
“Under the ordinary meaning of state laws prohibiting sports betting, entry fees in draft style games constitute bets or wagers on sports — unless and until the state legislature or the electorate change those laws,” Bonta said.
The opinion also rejects arguments that peer-to-peer contests should be treated differently to contests “against the house.”
“Just because the operator is not betting against the players does not mean that the players are not betting against each other,” the opinion reads. “Pari-mutuel wagering on horses, for example, is operated on a peer-to-peer basis, yet participants clearly bet against one another.”
Industry Reaction
California Governor Gavin Newsom quickly weighed in on the opinion, with a spokesman for the governor telling KCRA that “the attorney general, in his independent capacity, issued the 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,” the spokesman said.
Despite the opinion, daily fantasy operators are, at least so far, continuing to operate in the Golden State.
"We agree with Governor Newsom — AG Bonta got it wrong,” said JT Foley, executive director of the Coalition for Fantasy Sports, which includes PrizePicks, Underdog, Betr, Dabble and Splash.
Foley referenced a court ruling Wednesday that declined Underdog’s bid for an injunction preventing the opinion’s release.
“As the court said yesterday, this opinion ‘does not effect any change in law’ and does ‘not carry the weight of law’,” Foley said. ”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.”
Traditional daily-fantasy powers DraftKings and FanDuel are continuing to operate in the state pending further conversations with the attorney general regarding the legal opinion.
“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,” a DraftKings spokesperson said.
“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.”
The statement added that DraftKings intends to work with stakeholders, including the Attorney General’s office, to try to find an amicable resolution.
A similar sentiment was expressed by a FanDuel spokesman, who said that the company “looks forward to meeting with the Attorney General’s office to talk through our next steps.”
A message on FanDuel’s site informs California players that the company is “currently reviewing the legal opinion” but that they can continue to participate in daily fantasy contests.
One group pleased by Thursday’s opinion were California Indian gaming tribes, who have long decried the presence of daily fantasy and other forms of unregulated gaming that they argue infringes on their exclusivity over most forms of gaming.
“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,” said James Siva, chairman of CNIGA.
“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,” Siva said.
