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Draftkings and Fanduel: Legal in Ohio

The blog, news and resources of Bieser Greer

March 03, 2017

Draftkings and Fanduel: Legal in Ohio


Online daily fantasy sports have exploded in recent years. Draftkings and Fanduel are the two most prominent websites offering daily fantasy sports. While these websites are incredibly popular, they may run afoul of state criminal laws. Individual states have different positions. Some states consider daily fantasy sports legal and regulate them like gambling. These states include Colorado, Indiana, Kansas, Maryland, Mississippi, Missouri, New York, Tennessee, and Virginia. Some states have such restrictions that Draftkings and Fanduel do not operate in Arizona, Iowa, Louisiana, Montana, and Washington. The remaining states have not clarified the issue entirely or require a license (Nevada). The current state of the law in Ohio does not address whether online daily fantasy sports are, in fact, legal.  Approximately 2 million people in Ohio participate in online fantasy sports. With an estimated population of 11.6 million, that is 17% of Ohioans that could be affected or at least must consider the consequences of any potential legislation affecting Draftkings or Fanduel.[[1]](https://black-curlewzx-cloudventzx-net.i.proxee.co/_drafts/draftkings-and-fanduel-legal-in-ohio.md#_ftn1 “”)

There are a wide variety of ways to participate in daily fantasy sports across multiple professional sports. Depending on the category, the number of participants in any single game ranges from two people to thousands. The participant pays an entry fee of $0 to over $10,000.  Once entered, the participant assembles a “team” by picking, or drafting, individual players from actual professional sports teams. Based upon that player’s and the assembled team’s statistical performance, in addition to the payout structure of any particular game or category, prize money is distributed. In some categories the prize money is guaranteed regardless of the number of participants. In others, prize money is not guaranteed unless there are a certain number of entrants into that contest. Generally speaking, Draftkings and Fanduel keep a percentage of the entry fees.

Online daily fantasy sports are “permissible” under federal law. The Unlawful Internet and Gambling Enforcement Act of 2006 makes it illegal for an entity to accept a bet or wager over the internet. 31 U.S.C. Section 5363. However, the law excludes fantasy sports and therefore does not make them unlawful. The Act also acknowledges that it does not preempt States regulation of online fantasy sports.

Ohio Revised Code, Title 29, Section 15, regulates gambling in Ohio. There are a few provisions which may apply to online fantasy sports. Specifically, “[n]o person shall…[e]ngage in bookmaking, or knowingly engage in conduct that facilitates bookmaking,” or “[e]stablish, promote, or operate or knowingly engage in conduct that facilitates any game of chance conducted for profit or any scheme of chance…” R.C. 2915.02 (A)(2). “Bookmaking” means the “business of receiving or paying off bets.” R.C. 2915.01 (B). “Scheme of chance” means, among other things, a “pool conducted for profit” or “other scheme in which a participant gives valuable consideration for a chance to win a prize.” R.C. 2915.01 (C).  Therefore, under Ohio law, Draftkings and Fanduel are arguably illegal gambling depending on the game being played. “Pools conducted for profit” seem to present the biggest issue because a portion of the entry fee is not paid out in prize money. This is known as a “rake.”  However, advocates for Draftkings and Fanduel contend that fantasy sports are not illegal gambling because they are games of skill, not games or schemes of chance.

On June 30, 2016, the Ohio Attorney General’s Office issued a Memorandum to Ohio Senator Bill Coley regarding daily fantasy sports websites. The Memorandum generally analyzed the various contests offered and whether Draftkings and Fanduel are illegal gambling under Ohio law. Notably, the Memorandum addresses those contests where the skill versus chance inquiry is irrelevant – “pools conducted for profit.” While illegal, this term is not defined under current Ohio law.  Ultimately the Memorandum was inconclusive and did not give any formal position.

Senator Coley subsequently introduced Senate Bill 356 in September of 2016. The bill would have defined daily fantasy sports as a “scheme of chance,” thus making daily fantasy sports illegal. Coley argues that those games that charge a “rake” are illegal under existing law. In December of 2016, Ohio Senator Dave Burke introduced Senate Bill 375. The bill would legalize and regulate daily fantasy sports in Ohio, requiring operators to pay a $30,000 license fee. Moreover, the legislation would acknowledge that the outcomes of online fantasy sports “reflect the relative knowledge and skill of the fantasy contest players…”

The 132nd Ohio General Assembly is once again taking up the issue. House Bill 132 is the most recent legislation introduced on March 16, 2017 by House Representative Jonathan Dever and House Representative Robert McColley. The legislation mirrors Senator Burke’s Senate Bill 375 and would legalize online fantasy sports. So far, there has been no legislation introduced in the current session that would outlaw online fantasy sports where a profit is earned.

Stay tuned for a potential legislative battle.

 

[1] State by state analysis current as of June 2016 per the Ohio Attorney General.

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