- Reflecting a growing trend among states, the Florida Gaming Control Commission has issued cease-and-desist letters to three fantasy sports operators whose business models are suspected of promoting gambling and other illegal activities.
- The letters underscore the gravity of the allegations and the compliance risks faced not only by fantasy sports operators, but the media outlets and advertising agencies that promote them.
- This Holland & Knight alert reviews the current fantasy sports contest and gambling landscape and the significant roles state legislatures and courts could play going forward.
The Florida Gaming Control Commission (FGCC) has taken a significant step by issuing cease-and-desist letters to three online fantasy sports operators. Though this marks the FGCC's first action against the online fantasy sports industry in Florida, it reflects a growing trend across the country in which several states are navigating the legal nuances between "fantasy" contests and gambling.
Legal Landscape in Florida and Industry Divide
The FGCC alleges that these operators may be accepting illegal wagers and conducting illegal lotteries involving Florida residents. "Under Florida law, betting or wagering on the result of contests of skill, such as sports betting, including fantasy sports betting, is strictly prohibited and constitutes a felony offense unless such activity is otherwise exempted by statute," the letters state. Media outlets promoting such activities also face potential legal consequences because "[a]dvertising for or otherwise aiding and abetting such illegal lotteries constitute separate felony offenses."
The legal landscape surrounding fantasy sports in Florida is complex. The law provides that "[w]hoever stakes, bets, or wagers any money or other thing of value upon the result of any trial or contest of skill, speed or power or endurance of human or beast ... commits a felony of the third degree." Fla. Stat. § 849.14. The courts, however, have distinguished between "stake, bet or wager" and "purse, prize or premium." While the former is considered gambling, the latter is viewed more broadly and, if offered to a successful contestant in a game of skill, Florida courts have held that it is not generally considered gambling.
This legal nuance has led to a divide in the industry. Some argue that fantasy sports involve skill and purses, making them legal, while others contend they involve chance and wagers, rendering them illegal gambling. Proponents and opponents rely on opinions issued by the Florida Attorney General in 1990 and 1991, respectively, to support their arguments.
Implications and Ongoing Legal Battle
These cease-and-desist letters underscore the gravity of the allegations and the compliance risks faced by operators, media outlets and advertising agencies. They are poised to impact Florida's online fantasy sports industry, especially amid the ongoing legal battle related to the gaming compact, which is headed to the U.S. Supreme Court. It is worth noting that the language of the gaming compact suggests that fantasy sports are not currently authorized in Florida.
Florida is not alone in addressing this issue. In fact, a growing number of states have identified similar games and are investigating a handful of operators. In August, the New York State Gaming Commission and the Michigan Gaming Control Board proposed new regulations that would prohibit proposition selection or fantasy contests that mimic proposition contests and determined that the proposition contests found on certain fantasy sports websites, which purport to distinguish between player vs. house fantasy contests, are "essentially sports betting."
In July, both Wyoming and Maine sent a variation of cease-and-desist and complaint notices to two of the same operators that received the Florida cease-and-desist letters, warning them that their offerings "appear to fall under the exact definition of 'sports wagering'" as defined by the law. Meanwhile, Ohio continues to investigate several fantasy sports website for allegedly offering illegal gambling.
However, regulators in other states – including Arizona, Colorado and Indiana – have cleared the path for some of these operators, but not without exerting additional scrutiny first. Colorado, for example, allowed the games only in a scaled-back version with two primary differences: 1) a user must pick at least four players, and 2) the selections are limited to the over/under total on a player's projected fantasy scores.
Navigating the Legal Maze
Determining the legality of specific games requires a nuanced, in-depth analysis on a state-by-state level and may necessitate clarifications from courts or legislatures. Compliance and timely responses to gaming commissioners' inquiries are critical.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.