03.19.2015

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Updates

Based on their interpretation of Washington state gambling laws, many fantasy sports game operators do not allow players from Washington to participate in pay-to-play fantasy sports games.  Game operators and players alike were hopeful this would change when Washington state legislators proposed new legislation to legalize fantasy sports games in their state.  However, a problem with the proposed legislation surfaced almost immediately —a problem that centers on the difference between season-long fantasy sports and daily fantasy sports.

This update discusses Washington laws related to fantasy sports and the status of proposed legislation to change those laws.  It also briefly compares the treatment of fantasy sports under Washington law and under federal and other state law.

Washington State Legal Landscape for Fantasy Sports

Most states use the dominant factor test to distinguish between games of chance and games of skill.  Under Washington law, however, a game is a game of chance if the outcome depends in “material degree” on chance, notwithstanding that skill may also be a factor.  RCW 9.46.0225.  Washington courts have held that even games that are predominantly skill-based constitute gambling if the game depends in a material degree on an element of chance.  State ex rel. Schillberg v. Barnett, 488 P.2d 255, 258-59 (Wash. 1971).

Because Washington law requires relatively more skill and less chance than most other states for a game to qualify as a game of skill, there is more risk that pay-to-play fantasy sports games will be treated as illegal gambling.  In addition, the Washington State Gambling Commission has publicly stated its conclusion that pay-to-play fantasy sports games constitute illegal gambling in Washington.

Because of the risk that the games would be held to be illegal gambling, most fantasy sports game operators do not allow players in Washington to participate in pay-to-play fantasy sports games.

National Legal Landscape for Fantasy Sports

Outside of the state of Washington things are different.  The Uniform Internet Gambling Enforcement Act (UIGEA) is a federal law passed in 2006 that targets on-line gambling.  UIGEA contains an express exclusion for fantasy sports games that meet certain criteria.  Many in the fantasy sports industry rely on this exclusion to assert that fantasy sports games are legal under U.S. federal law.  While there is room for disagreement about this assertion, the exclusion for fantasy sports in UIGEA has been a significant factor in the growth of online fantasy sports.

At the state level, most states require less skill and allow for more chance when qualifying a game as a game of skill.  In testimony before the Washington State Senate Committee on Commerce and Labor, a spokesperson for the Fantasy Sports Trade Association expressed the Association’s belief that pay-to-play fantasy sports games are legal in 45 states and illegal in only five.  The five states that the Fantasy Sports Trade Association identifies as the highest risk states are Washington, Montana, Arizona, Iowa and Louisiana.  Of those five states, Iowa and Montana also considered legislation to make fantasy sports games legal in their current 2015 legislative sessions.

Proposed Washington Legislation and Daily Fantasy Sports

Senate Bill 5284 and companion House Bill 1301 were introduced in January of 2015.  As originally proposed, the bills would amend Washington law to legalize fantasy sports games using a definition of fantasy sports games that tracks the definition in UIGEA.

The Washington State Senate Committee on Commerce and Labor held the first hearing on Senate Bill 5284 in February of 2015.  At the hearing it became clear that there were problems with the bill when Senator Pam Roach, the principal sponsor of Senate Bill 5284, stated that she wished to amend the proposed language for the bill.

Senator Roach explained that the amended version of the bill would, unlike UIGEA, make a distinction between season-long fantasy sports and daily fantasy sports.  Specifically, under the language she intended to propose, season-long fantasy sports games would be legal but daily fantasy sports games would be illegal.

Daily fantasy sports games are a version of fantasy sports games where, as the name suggests, the outcome of the game is determined on a daily basis rather than over the duration of an entire sports season.  Supporters of daily fantasy sports assert that it is the same game played over a shorter period and that any legal distinction based on the time period would be arbitrary and baseless.  Critics of daily fantasy sports assert that the shorter time period provides less time for the exercise of skill and increases the probability that the outcome will be determined by chance.

A spokesperson for the Fantasy Sports Trade Association testified at the hearing in support of the bill as originally proposed.  When asked by the Committee, the spokesperson made it clear that the Fantasy Sports Trade Association does not support making a distinction between daily and season-long fantasy sports.  The spokesperson pointed out that if Washington were to adopt a law making this distinction, it would be the only state in the country to do so.

As of the date of this update, no further progress has been made with respect to Senate Bill 5284.  And the companion house bill has not been officially referred to committee.  Given the level of interest in and funding for daily fantasy sports, it is likely that there will be significant resistance to any legislation making a distinction between daily and season-long fantasy sports.  Since Washington authorities already take the position that all fantasy sports are illegal, they are unlikely to push for new legislation on the issue.  And the Fantasy Sports Trade Association may prefer to have no new legislation in Washington rather than legislation making a distinction between the daily and season-long versions of the game.  Under these circumstances, Washington state is unlikely to make progress on legalizing fantasy sports games any time soon.

Practical Tip

Given the uncertainty surrounding this legislation, it would be prudent to continue to treat daily fantasy sports or fantasy sports in general as impermissible for players in Washington state.

 
© 2015 Perkins Coie LLP