Ken Paxton

AG Paxton: Sports Gambling Websites Require Change in Law

Tuesday, January 19, 2016 – Austin

Texans and sports, particularly football, have always gone together. So it’s natural that online fantasy sports leagues have grown into a fun way for Texans to live vicariously through the competition of the actual participants on the field of play.

Now, numerous companies have built innovative business models expanding friendly leagues to a much more complex environment involving hundreds of millions of dollars. Ordinarily such entrepreneurship is a welcome fit in our business-friendly state. However, Texans also have a deep culture of skepticism toward gambling and its impact on our communities. So what to do when our gambling laws cross paths with both our love of sports and our love of innovation?

That is precisely what led to the question my office received a few months ago, asking whether specific fantasy sports leagues are violating Texas gambling laws. It’s my duty as Attorney General to look to the law – as passed by the people’s representatives – to answer the question.

In Texas, the law is clear that gambling laws are triggered by partial – that is to say, “any” – chance.  This is based on the text of the law and is reinforced by my predecessors’ opinions. 

As such, the business practices of a few specific companies actively cross the line between fantasy sports and illegal gambling.  To be clear, your traditional fantasy league, where the participants either do not gamble money or they split the entire pot, is – as a general rule – legal. It’s when third parties get a cut of the pot where they get into dangerous legal ground.

In mounting a defense against what seems fairly obvious, these companies first claim their fantasy leagues are not, in fact, about chance. This is, simply put, a position that’s difficult to be taken seriously. A key injury or, as Cowboys fans and Dez Bryant know all too well, a bad call by a referee is impossible to predict. Chance can and does make the difference in winning or losing, for a team or a fantasy lineup.

Even so, these companies insist this is a contest of skill: specifically, one’s ability to pick successful players and teams.  Of course there is skill involved when a participant may use detailed analytics to pick better players and have better teams – just as a poker player may well play a hand better than another player, or as someone may pick horses better than another.  But the chance of the underlying sporting event remains – there is “some” chance. 

In addition, they claim their contests measure a person’s ability to predict, say, football performance the same way, for example, as a golf tournament measures a person’s ability to play golf or a fishing tournament measures one’s ability to catch fish. But equating the skill of betting on the performance of football or other players with the actual skill of driving a golf ball or reeling in bass turns the statute on its head. Worse, it represents such a loose interpretation of the law that it would essentially render Texas’s laws against gambling meaningless by creating the exception that swallows the rule. These daily fantasy leagues, however much skill is or is not involved, is a bet on the underlying bona fide contest – that is, the actual players on the field playing the actual sport. 

The opinion I issued is meant to alert the many businesses involved that there are real concerns here.

It’s worth noting that lobbyists have tried, time and again, to convince the Legislature to change our gambling laws significantly, and have failed.  But the Legislature is precisely where it should be decided, not through corporate steamrolling in the name of the false trumpeting of “liberty.” The policy behind this conflict is not without merit. The people of Texas have long appreciated the beauty of the robust free market as well as the dangers inherent in unfettered, easily accessible gambling.  And the ease of this kind of risk – carried out from an app on a phone or a computer – is particularly worthy of debate among state leaders.

As I prepared this opinion, a strategic, well-coordinated and well-funded campaign has been underway in Texas to conflate the practice of everyday, friendly fantasy sports leagues with the big business of online companies making millions of dollars off of the losses of Texans.  Keep in mind that in an injunction sought by the New York Attorney General, it was revealed that nearly 90 percent of DraftKings players lost money in 2013 and 2014.  So, these companies hired expensive lobbyists and lawyers to engage in a clever ad campaign and social media blitz – including a recent op-ed attacking this office.

No amount of marketing, lobbying, and advertising muscle can change the law by sidestepping the Legislature. Again, your friendly leagues aren’t at issue and they aren’t in danger of being shut down. This is about the companies acting, in essence, as “the House,” making millions of dollars off of Texans who lose money every week.  Neither I nor this office will ever cower from the truth because of attacks in op-eds or on social media, powered by loud voices and funded by businesses with deep pockets.

Some have argued that there are greater issues facing our government than fantasy sports operators promoting gambling on bona fide games. To that I say a hearty “amen,” but that we always have to walk and chew gum. So we will continue to go after human traffickers, fight to defend Texans, stand up to the President’s executive amnesty program, work to collect child support and carry out all the important activities of this office. But most notably, we will always stand up to defend the rule of law.