Are participants in fantasy sports leagues gambling? This is what Charles E. Humphrey Jr., an attorney in Colorado, is alleging in a complaint filed in the U.S. District Court for the District of New Jersey. Humphrey alleges that certain media companies, including the Walt Disney Company, Viacom Inc., ESPN cable network, CBS and The Sporting News, are sponsoring illegal gambling by hosting pay-to-play fantasy leagues. Humphrey seeks to recover all money lost by players participating in the leagues and treble damages against these media outlets.

Essentially, Humphrey argues that these leagues constitute “games of chance” because much of the game is out of the participants’ control, as they may be affected by player trades, coaching decisions, real world injuries or suspensions. Because Humphrey claims that these factors give entrants little control over the results of the game, he argues that these fantasy sports leagues are not games of skill, where the skill of each participant affects the selection of the winner, but that they are instead games of chance.

Why does this matter? Because U.S. law maintains that lawful games of chance, such as sweepstakes or drawings, cannot require entrants to submit consideration to enter the game. Consideration has been defined to include the payment of money, the purchase of a product and, in some states, non-monetary actions, such as driving to a location or attending a sales presentation. Thus, if Humphrey establishes that the fantasy sports leagues are really games of chance, rather than a game of skill, it would be illegal for these leagues to collect entrance fees, as it would be like making a “wager” or “bet” on a horse at a sporting event.

Humphrey’s suit raises an interesting question of law. Fantasy sports leagues have largely avoided legal interpretation and, instead, appear to be supported by legislation. In fact, the Internet Gambling Prohibition and Enforcement Act, H.R. 4411, which is still pending a vote in the U.S. Senate, appears to have carved out an exemption for fantasy sports leagues. However, the exempting language is not particularly clear and therefore may not excuse these leagues if chance, rather than skill, is the dominant factor in the selection of the winner in the game.

Anthony V. Lupo
202.857.6353
Lupo.anthony@arentfox.com

Sarah Bruno
202.775.5760
Bruno.sarah@arentfox.com