United States: KMT's David Klein Talks Fantasy Golf With Legal Sports Report - While Daily Fantasy Golf Keeps Growing At DraftKings And Beyond, Legal Questions Linger

Last Updated: July 16 2015
Article by David O. Klein

The legal landscape of daily fantasy sports has been the subject of an ongoing debate, both at the state and federal levels.

The golf vertical, however, might be particularly troublesome in the world of DFS. With its increasing popularity there have been increasing questions about the vertical's legality under the Unlawful Internet Gambling Enforcement Act of 2006.

"(Golf) is a very hot area now," said David Klein, managing partner at New York law firm for Klein Moynihan Turco LLP, which focuses in part on fantasy sports and gaming law. "Increasingly, my clients, some of which are big players, and the biggest players are all getting into this."

But entering daily fantasy golf — something FanDuel has so far avoided while rival DraftKings has heavily invested — comes with significant risk.

Some legal experts in this area believe that many versions of daily fantasy golf are at best on shaky legal ground. Yet with the size of some DFS golf contests, including DraftKings' $3 million Millionaire Maker contest for this week's British Open, it is not a shock to at least one expert that some companies feel golf is worth a gamble.

"It's not surprising that you are finding a company, even a large one, that's willing to play very loosely with the law and accept the risks as it may be," said Marc Edelman, who specializes in sports and gaming law as an associate professor of law at the Zicklin School of Business, Baruch College, City University of New York.

The question at hand

Edelman has written extensively on the legal risks of Daily Fantasy Sports. The key question with certain golf games to Edelman is whether they violate the UIGEA's narrow carve-out that requires "fantasy or simulation sports" contest results emerge from accumulated player statistics in "multiple real-world events."

"There is nothing that is per se illegal about running a fantasy golf contest," Edelman said. "If you want to create a fantasy golf contest based upon the results of golfers in various different statistical categories over the course of various tournaments, that does not seem on its face to break the law."

But many DFS golf games are not structured to encompass multiple golf tournaments. Instead, most golf games to this point are held over the course of a single golf tournament.

However, such a structure could be a problem.

"Operate based on just a single golf tournament, and it seems very difficult to make the argument of compliance with the carve-out," Edelman said.

Interesting to note, Edelman said that as long as a game falls within the UIGEA's fantasy sports carve-out, then payment processors (such as credit card companies) will not be prosecuted.

"Meaning that compliance with this fantasy sports carve-out is important not only for the game itself, but extraordinarily important for any company that processes payment through the game," Edelman added.

Rival companies interpret law differently

Nigel Eccles, CEO of FanDuel, said last year in a RotoGrinders forum that legal concerns have indeed kept FanDuel from developing a PGA Tour game:

"We won't be introducing fantasy golf. I think it is commercially attractive (its [sic.] probably our next most requested sport) but I'm uncomfortable with the legality of it. Every time I have to make a decision like this I think whether the argument would stand up in court. To me a reasonable person would consider a golf tournament to be a single event, not multiple events. Therefore it would not fall under the UIGEA safe harbor. That does not automatically make it illegal (it may still be a game of skill under state law) but it does make it more risky."

On the other hand, DraftKings has said that a typical 72-hole PGA Tour golf tournament is actually four individual events in one. That makes its PGA Tour games compliant with the UIGEA, according to DraftKings.

"We wouldn't have launched [golf] if was a concern," Femi Wasserman, a vice president at DraftKings, told Golf.com in a story earlier this year. "We're pretty rigorous about our examination of the law and to try and make sure we're compliant with all the regulations."

The argument that one tournament is actually four individual events is an argument that Edelman considers tough to make. (Full disclosure: Edelman is representing a fantasy sports company in an unrelated contract litigation suit against DraftKings.)

"I have represented many companies in the fantasy sports marketplace, and that is not an argument that I would ever make or encourage a client to make," Edelman said.

Court challenges?

The key to all this is, of course, would be a viable court challenge.

Edelman said that anything from state or federal governments to an individual participant could one day bring suit.

"There is no shortage of who might attempt to challenge in court," said Edelman, who refused to offer an opinion whether or not a challenge was an inevitable.

So far, DFS golf has exploded in popularity without many batting an eye. And until a court answers the question definitively, if that ever happens, DFS golf fans can count on the vertical to continue.

"There are some fantasy sites that are viewing it conservatively, and some that are viewing this space aggressively," said David Klein. "And there hasn't been any challenge, to my knowledge, yet."

Source: Legal Sports Report

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