Fantasy Baseball Is Back, But Is It Legal To Play For Money In Your State?

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Since March 1979 when Dan Okrent and his friends met at New York's La Rôtisserie Française restaurant, the month of March has been the traditional time for drafting fantasy baseball teams.  

Fantasy baseball contests today range from the full-season contest variety that Dan Okrent and his friends have used since 1979, to the shorter one-month games offered on websites such as Shandler Park, to even shorter still daily games.

However, while playing fantasy baseball is a lot of fun, both companies operating commercial contests (such as CBS and Yahoo , among many others) and the individuals playing in them need to make sure that the contests are legal.  If the contest involves an entry fee and a cash prize, legality generally comes down to an assessment of the game rules and the states in which the contest operates.

Luckily today, playing fantasy baseball  in most states and under most formats is perceived as entirely legal.  The Unlawful Internet Gambling Enforcement Act of 2006 includes an explicit carve-out for fantasy sports games that meet three criteria: (1) the value of the prizes is not determined by the number of participants or the amount of fees paid; (2)  all winning outcomes reflect the relative knowledge and skill of the participants; and (3) the fantasy game's result is not based on the final scores of any real-world games.

Nevertheless, some states' regulate online gaming and other contests in a manner far stricter than federal law.  A limited number of states disallow pay-to-play contests that involve any chance at all.  In these states (known as 'any chance states'), most forms of play-for-cash fantasy baseball would violate the state gambling laws unless they fall under state-specific "social gaming" or "in-house gaming" exceptions.

In 'any chance states,' it is not advisable to play in online play-for-cash fantasy baseball contests, even though federal law may be more lenient.  One of the risks, among others, is inability to collect league winnings.

Even the operators of most fantasy baseball contests recognize that state laws are too risky to operate these contests with entry fees and prizes in Arizona, Louisiana, Iowa, Montana, and Washington; albeit, it is not clear that all fantasy baseball contests actually prevent users from paying entry fees and drafting trams within these states.

In addition, there are a number of other states in which play-for-cash fantasy baseball still might be viewed as illegal even though large providers such as Yahoo and CBS Sports are still willing to take that risk.  For example, CBS Sports runs a play-for-cash fantasy baseball contest each year that  allows contest entrants in Tennessee; even though there is a reasonable argument that Tennessee falls within the list of 'any chance' states.

Another state where fantasy baseball may have some risk is Kansas.  In Kansas, the state Gaming & Racing commission cannot seem to agree, even among itself, about the legality of fantasy sports.  Nevertheless, there is language appearing on the state website indicating these games are illegal (an utterly bizarre move, given that Kansas is now one of the states supporting New Jersey in attempting to legalize sports gambling altogether).

Finally, certain unique formats of fantasy baseball are more risky under both federal and state law.  Even though traditional forms of fantasy baseball seem legal in most states, any format of fantasy baseball that strays from the traditional skill-to-chance ratio present greater risk.  For example, fantasy baseball contests that involve smaller roster sizes and shorter fantasy seasons -- especially where players are initially allocated by draft -- seem to involve increased risk based on heightened impact of a single activity of chance on the overall result.

At the same time, fantasy baseball contests in which users compete against a host site, rather than other players, likely fail under even the Unlawful Internet Gambling Enforcement Act because winning outcomes are not based on "relative" knowledge of the participants, but rather the knowledge of the participant against the host site.

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Marc Edelman is an Associate Professor of Law at the City University of New York’s Baruch College, Zicklin School of Business, where he has written more than 25 law review articles including, most recently, "The District Court Decision in O'Bannon v. NCAA: A Gateway for Far Grander Change."   He also is a fantasy sports attorney, and a legal consultant for companies in the sports, online gaming, and social media industries. Nothing contained in this article should be construed as legal advice.

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