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The legal landscape surrounding legal sports betting and daily fantasy sports (DFS) continues a rapid evolution after the fall of the Professional and Amateur Sports Protection Act (PASPA).
States are drafting sports betting laws and filing bills around the country. This is all amid the new federal Wire Act opinion, which is winding its way through a legal challenge.
As the industry is continually evolving, here’s a look at some areas where state gambling laws have recently changed.
Daily fantasy sports
For many years, season-long fantasy sports leagues thrived. With limited exceptions, the legality of fantasy sports was not challenged.
Over the past few years, some fantasy sports upstarts evolved the business model from season-long to DFS. The advent of DFS, coupled with aggressive marketing and huge prize offers by some industry leaders, led to a flurry of legal activity.
This activity included enforcement actions by New York‘s attorney general and others. The endgame is still playing out, but a number of states have passed legislation to legalize DFS, which is subject to licenses, taxes and other conditions.
Other states have banned DFS through legislation or attorney general opinions. Some states have not yet acted. This has led to a patchwork of regulation, requiring fantasy sports operators to exclude players from several states.
Online gaming
In 2001, the Department of Justice‘s (DOJ) interpreted the Wire Act to be limited to sports betting. In response, a number of states passed legislation authorizing certain online gambling activity.
However, in 2019, the DOJ reversed its interpretation to include US online casino /gambling activities, leading to a number of pending lawsuits challenging the current interpretation. Some legislative efforts have stalled, but some states are still moving forward.
Sports betting
The sports betting market in the US is estimated by some to be a $100 billion market. Much of that represents illegal sports betting.
Despite the huge appetite of US sports bettors, most sports betting had been illegal in the US due to PASPA.
As a result of the demise of PASPA, there has been a flurry of state legislative activity related to sports betting. In anticipation of this decision, a number of states passed laws favorable to sports betting, with conditions on PASPA being struck down.
Other states moved promptly after PASPA was struck down. These states have pending sports betting legislation:
Many of these states, including Connecticut, Illinois, Michigan and Missouri, have introduced bills which would specifically accommodate for online sports betting, while other states, including Iowa and New York, have introduced legislation which would legalize “in-facility” sports betting.
Esports betting
Esports has been a huge growth driver for the video game industry. Many debate whether esports is actually a sport, but in many ways, it is being treated as such.
For example, international competitors are obtaining visas based on classification as professional athletes. One implication of this is that if esports is a sport, wagering on it is likely sports betting.
Those looking to offer esports betting will likely benefit from the favorable changes to the sports betting laws described above. However, just because PASPA was struck down, it does not mean that esports betting is legal under state law.
Legislative action and licensing will likely be required on a state-by-state basis. In addition to the general sports betting laws being passed, some states have, or likely will have specifically legalize esports betting.
To date, Nevada and New Jersey are the only states that have passed laws that specifically address the legality of esports betting. Many other states have introduced legislation that specifically addresses or affect the legality of esports betting:
- Illinois
- Indiana
- Maryland
- Massachusetts
- New Jersey
- Tennessee
Other states, such as Connecticut, Kentucky and Virginia have introduced sports betting legislation that do not expressly address esports but have defined “sport” or “sport wagering” in such a way that it is broad enough to cover esports.
Skill-based games
Due to the changing demographics and the challenges that land-based casinos have faced in attracting millennials to their facilities, casino operators have advocated for the legalization of skill-based games.
This covers a range of activities including integrating skill-based games with games of chance, such that a player increases his or her chance of winning based on his or her skill.
This enables video games and other skill-based activity to be incorporated into casino games. Companies like Gameco have emerged as leaders in the commercialization of this activity.
Gatto co-authored this piece with Mark A. Patrick. Patrick is the lead associate on the firm’s Social Media and Games industry team, also based in the Washington, D.C. office. He can be reached at mpatrick@sheppardmullin.com.
