Today, in a closely watched case in Illinois, a federal court dismissed a lawsuit brought under the Illinois Loss Recovery Act (ILRA) against daily fantasy sports site FanDuel, Inc. and daily fantasy sports player Patrick Kaiser, finding that the plaintiff lacked subject matter jurisdiction to bring the suit. This is one of several lawsuits that have been brought in Illinois courts against daily fantasy sports companies and individual winners.
If a person has lost more than $50 gambling, the ILRA, like a number of state loss recovery acts, allows that person who lost money or something of value to sue the winner to recover the money that was lost. The ILRA also provides that if a suit is not brought by the loser within six months, “any person” may bring an action against the winner and is entitled to recover three times the amount of money lost gambling. The plaintiff in this case, Christopher Langone, is that “any person” who brought the suit against Patrick Kaiser and FanDuel.
The complaint alleged that Kaiser won several hundred thousand dollars playing on daily fantasy sports sites including FanDuel.
The court dismissed the complaint because it lacked subject matter jurisdiction due to insufficient allegations in the complaint. The court noted that there was not even a bare assertion that there was a sufficient amount of money lost for a federal court to have the jurisdiction to hear the case. The court also noted that the complaint failed to identify a specific loser who lost a certain amount and failed to bring a claim as required under the ILRA.
A very interesting point in the decision is that the court held that FanDuel was not a “winner” in the context of the Illinois Loss Recovery Act. The plaintiff had alleged that the defendants were winners because they take a commission from the entry fees paid by participants in the games, but the court rejected that argument. The court noted that, “FanDuel does not place any ‘wagers’ with particular participants by which it could lose money based on the happening of a future events (i.e., the performance of certain athletes), but merely provides a forum for the participants to engage each other in fantasy sports games.”
The plaintiff alleged in the complaint that daily fantasy sports games are not a game of skill, but instead “a form of ‘exotic’ sports wagering subject to change.” The court in this case did not address the issue because it did not have to after it found that there was a lack of subject matter jurisdiction.
Although the court did not address all of the issues relevant to the daily fantasy sports industry in the case, this decision is a huge win for the industry. Loss recovery act cases will be harder to bring against daily fantasy sports companies that are not assuming risk in their games. Daily fantasy sports continue to grow rapidly and today’s decision helps to partially remove one roadblock to its growth.
Today the U.S. Court of Appeals for the Third Circuit affirmed a district court decision from New Jersey invalidating New Jersey’s sports betting law. The decision marks a setback in New Jersey’s efforts to implement sports betting in the state, but the case is very likely to be appealed to the Supreme Court where it could meet a different fate. Also, to the extent that online gaming, including poker, appears to be expanding on a state by state basis, the Third Circuit decision may be a setback to the approach for sports betting, and may be an invitation for federal legislators to revisit the federal statute held to bar New Jersey’s desire to permit sports betting. The full text of the opinion is available here.
The Professional and Amateur Sports Betting Act of 1992 (PASPA), prohibits any state from offering sports betting unless that state had a sports betting scheme in place between 1976 and 1990. Under the law Delaware, Oregon and Montana were granted limited sports betting schemes and Nevada is the only state authorized to offer single-game sports betting. Under the terms of the statute, New Jersey had an option at that time to seek to offer sports betting, but declined to do so.
In 2011, New Jersey revisited the issue and voters approved a referendum by a 2-1 margin to amend the state constitution to allow for sports betting in the state’s casinos and racetracks. The state legislature then passed a bill legalizing sports betting in the state and it was signed into law by New Jersey Governor Chris Christie (R). The New Jersey law would allow wagering on all major professional and collegiate sporting events, except collegiate sporting events involving New Jersey colleges, and all sporting events, professional or collegiate, taking place in the state.
In reaction to the new law, the National Collegiate Athletic Association, Major League Baseball, the National Football League, the National Basketball Association and the National Hockey League sued in federal district to prevent the state from offering sports betting. The U.S. Department of Justice then intervened to defend the constitutionality of PASPA. After the district court granted summary judgment in favor of the NCAA and the professional league plaintiffs, the state appealed to the Third Circuit Court of Appeals.
In a 2-1 decision issued today, the Third Circuit found that the leagues had standing to bring the case and that PASPA is a constitutional exercise of federal power that barred New Jersey from proceeding with sports betting in the state. The Third Circuit found that the leagues were able to meet the constitutional standard for standing to assert a challenge to New Jersey’s law, but stated that it was “hesitant to conclude that the Leagues may rely solely on the existence of the Sports Wagering Law to show injury.” The decision also found that PASPA was constitutional and that the anti-commandeering principle did not apply because PASPA serves to invalidate contrary state laws and not to directly regulate the states. In doing so, the court relied on the Supremacy Clause in its reasoning that the New Jersey sports wagering law is invalid because it is in direct contravention with PASPA.
The Third Circuit decision was by no means by consensus. In a dissent containing powerful language, Judge Thomas Vanaskie noted that there is clear precedent that the federal government cannot direct state legislatures to enact legislation or state official to implement federal policy. The leagues and the Department of Justice had argued that in those cases required the state was required to take affirmative steps to enact legislation and PASPA does not. The dissent noted that nothing in those cases, “limited the principles of federalism upon which those cases relied to situations in which Congress directed affirmative activity on the part of the states.” The nature of the anti-commandeering principle and if it requires the state to take affirmative steps will be a key part of any appeal from New Jersey.
New Jersey will now likely either petition for an en banc review in the Third Circuit or file a petition to have the Supreme Court review the case. New Jersey has 45 days to seek an en banc review in the Third Circuit. If New Jersey files a petition with the Supreme Court it will have 90 days from today to appeal the decision. The Supreme Court hears a very small percentage of the cases appealed to it, but due to the interesting and complex constitutional issues raised in this case it seems relatively likely that this case will be heard. The Supreme Court has never addressed the constitutionality of PASPA.
Today’s decision from the Third Circuit marks a setback in New Jersey’s efforts to legalize sports betting, but this case is far from over. The dissenting opinion on a key issue provides a very strong basis for review and shows that the court struggled in forming its opinion on the issue. In addition to the continuing fight in the courts, the Third Circuit decision may also spark new federal legislative efforts to permit some form of limited licensed sports betting beyond the few states now permitted to offer it. We will continue to follow this case and provide updates here.
A lawsuit recently filed by Incredible Investments, LLC, owned by entrepreneur Consuelo Zapata, alleges that the language in a recently enacted Florida law that was intended to shut down Internet cafes and slot machines has actually outlawed all mobile devices that are capable of accessing the Internet. The complaint, which seeks to have the new law declared unconstitutional, alleges that in the process of hastily passing the bill, the legislators crafted language that could include any smartphone or computer in Florida. The complaint, a copy of which is available here, asks the court to throw out the law, which was purportedly passed “in a frenzy fueled by distorted judgment in the wake of a scandal that included the lieutenant governor’s resignation.”
The law in question was signed into law on April 10, 2012, by Florida Governor Rick Scott. Zapata, whose clientele is primarily migrant workers seeking to access the Internet, owns one of the approximately 1,000 internet cafés that was shut down as a result of the law.
The bill was introduced in the aftermath of a state investigation which found that a purported charity earned $290 million from an Internet gambling effort but donated only $5.8 million of those funds to charity. The investigation resulted in 57 arrests on racketeering and money laundering charges. Former Florida Lieutenant Governor Jennifer Carroll, who has ties to the charity but has not been accused of wrongdoing, resigned in the wake of the investigation.
The problem with the law that was noted in the lawsuit is that it amended the definition of a slot machine to include “any machine or device or system or network of devices” that can be used to play games of skill or chance, which can be activated by “money, coin, account number, code, or other object or information.” The lawsuit alleges that with such a broad definition of a slot machine, any smartphone or computer is effectively banned in Florida because it could be used to access the Internet to play an illegal game.
It is unclear what the result of the lawsuit will be. The court may agree with the plaintiff that this law has effectively banned mobile devices and should be struck down. However, courts often attempt to avoid constitutional issues when interpreting laws and could find that another reading of the statute in this case would be more appropriate.
Whichever way the court does decide on the law, this lawsuit shows the dangers of a swift reaction from a legislature after a high profile incident occurs. The unintended consequences of legislation can be quite serious, as is alleged to be the case here, and a thorough examination of the problems and the best way to address them could have avoided the confusion that has resulted from this law.
More than two years after “Black Friday” – the day on which federal prosecutors shut down the U.S. operations of Full Tilt Poker and other major online poker providers and seized billions of dollars in assets – it appears that the final chapter in that enforcement action may soon be written.
The Garden City Group, the entity responsible for claims administration for repayment of Full Tilt Poker players, announced on August 1 that it would soon begin that remission process. Remission of funds to Full Tilt Poker’s U.S. players was made possible because of PokerStars’ payments pursuant to its settlement of civil forfeiture claims with the government. And, due at least in part to advocacy by the Poker Players Alliance (PPA), the calculation formula to be used for the process will be based on players’ final balances as of April 15, 2011, and not on the amount that they originally deposited into their Full Tilt Poker accounts.
Following the Black Friday asset seizures, PokerStars reached a settlement with the United States under which it forfeited $547 million to the U.S. government and agreed to repay approximately $184 million to former customers of Full Tilt Poker outside the United States. One of the valuable aspects of this settlement, from the perspective of former Full Tilt Poker players in the United States, was that it created a fund of money for repayment of players that would not otherwise have existed due to Full Tilt Poker’s financial status at the time of the seizure.
The settlement provided that the United States would oversee a remission process pursuant to which it would return funds to Full Tilt Poker players, but the law governing those processes vests the government with enormous discretion in, among other things, the manner in which the government calculates the amount to be distributed to each recipient. In the case of Full Tilt Poker’s U.S. players, the government was considering an approach that would have based the payment to each player on the amount he or she had deposited into a Full Tilt Poker account, regardless of the wins or losses in that account thereafter.
An alternative approach was to base the payment on the balance remaining in the account on April 15, 2011 – the last day on which the player could have accessed his or her account. The PPA and other advocates of this approach point out that this was a truer measure of the “loss” that each player suffered; to the extent that a player’s balance was lower on that date than his or her initial deposit, it was not due to any wrongdoing but rather a result of poker play. A player who received his or her initial deposit that was greater than the balance on that date would receive an unjustified windfall by recouping money lost fairly in playing online poker. Thus, to use deposit amounts as the basis for remission would effectively redistribute funds among players in a way that was unrelated to the purpose of the seizure and remission. This would have been inconsistent with applicable regulations’ definition of the “victim” to receive remission in terms of the loss suffered “as a direct result of the commission of the offense underlying a forfeiture.” (See 28 C.F.R. § 9.2(v)).
Advocates also expressed concerns that a “deposit”-based refund process would be unduly complicated, and would create inequities between foreign Full Tilt Poker players and U.S. PokerStars players, who received refunds based upon account balances.
It remains to be seen whether Full Tilt Poker’s U.S. players will receive the full amount of their account balances or a proportionally smaller amount – a decision that will be based on whether the amount available for remission is equal to or greater than the aggregate amount of claims filed for such refunds. But the decision to base remission on account balances and the indication that the long-delayed process will start soon are both positive signs that Full Tilt Poker’s U.S. players may soon be made whole from their Black Friday losses.
Very lively oral arguments were held today, June 26, in the U.S. Court of Appeals for the Third Circuit on the New Jersey sports betting law, in a case that will have an enormous impact on the future of sports betting in the United States.
At issue in the case is the federal Professional and Amateur Sports Protection Act of 1992 (PASPA), which prohibits any state from offering sports betting unless that state had a sports betting scheme in place between 1976 and 1990. Last year, New Jersey Governor Chris Christie signed into law a bill authorizing single-game sports betting in the state. In August, the four major professional sports leagues and the National Collegiate Athletic Association (NCAA) filed suit arguing that the state’s sports gambling law was in violation of federal law.
In December 2012, Judge Michael Shipp of the U.S. District Court for the District of New Jersey held oral arguments to determine whether the sports leagues had standing to bring the lawsuit and determined that they did have standing. The U.S. Department of Justice (DOJ) later intervened in the case to defend the constitutionality of the statute. Oral arguments were held in February, and Judge Shipp held that the New Jersey law was invalid as conflicting with PASPA, which he found to be a valid exercise of congressional power. In March, New Jersey filed an appeal with the Third Circuit, appealing both the standing and constitutionality rulings.
Today in the Third Circuit, the judges dictated the path that the oral arguments took for both sides. Ted Olson, a former United States Solicitor General arguing on behalf of New Jersey, began the arguments by stating that PASPA is “plainly unconstitutional.” Olson also argued that the sports leagues did not have standing to bring the lawsuit because they did not meet the Article III requirement that they actually suffered harm from the New Jersey wagering law.
On the issue of anti-commandeering, which could be crucial to the court’s decision on the constitutionality of PASPA, the judges peppered Olson with questions regarding precedent on the issue and whether “commandeering” is limited to instances in which the federal government forces a state to take affirmative steps. There seemed to be some skepticism from the judges that PASPA should be considered an instance of commandeering because New Jersey did not have to do anything to comply with the statute. Olson argued that PASPA is a federal initiative and the responsibility for enforcing it is on the states, thus making this an instance of commandeering.
The issue of state sovereignty was not an issue that New Jersey focused on in the district court or in their briefs in the Third Circuit, but today Olson focused more on the issue by citing Supreme Court decisions that were issued yesterday and today, arguing that those cases support the position that PASPA is a violation of state sovereignty. Olson took contention with the argument made by their opponents in the briefs that the issue of state sovereignty only applies to states that are newly admitted to the Union.
Paul Clement, also a former United States Solicitor General, argued for the sports leagues. He pointed to the Third Circuit’s previous decision in Office of the Commissioner of Baseball v. Markell, a case that he conceded did not directly address standing, to support his position that the leagues have standing in the case. Clement also pointed to other cases, such as copyright cases, that show that the leagues are entitled to protect their product, and in sports wagering, it is their product, the games, that is at issue.
Clement was questioned about the recent Supreme Court decisions and was asked why PASPA was not a violation of state sovereignty. Clement attempted to distinguish the cases by arguing that they did not apply to PASPA because it was passed under the Commerce Clause, which affords the federal government broad powers to regulate interstate commerce. The U.S. Attorney for the District of New Jersey, Paul Fishman, argued on behalf of the federal government and agreed with Clement’s stance that PASPA is distinguishable from those cases.
There is no definitive timetable for a decision in the case, but it may take several months before an opinion is issued. Regardless of the decision reached by the Third Circuit, the losing party will have the option of seeking a rehearing en banc in that court or filing for a writ of certiorari to the United States Supreme Court. However, both these steps are subject to court discretion.
The ruling from the Third Circuit in this case will have far-reaching implications. A decision in New Jersey’s favor would remove the primary hurdle preventing states from offering sports betting within their borders. The panel today left no clear impression about which way they are leaning in their decision. and ultimately it may take a Supreme Court ruling before there is a definitive answer on PASPA.
On June 7, 2013, the U.S. Department of Justice (DOJ) as well as the four major professional sports leagues and the National Collegiate Athletic Association (NCAA) filed their briefs in the U.S. Court of Appeals for the Third Circuit in a case with major implications for the future of sports betting in the United States.
Last February, U.S. District Judge Michael Shipp struck down New Jersey’s new sports betting law, finding it invalid as conflicting with federal law. The federal law at issue is the Professional and Amateur Sports Protection Act of 1992 (PASPA), which prohibits any state from offering sports betting unless the state had a sports betting scheme in place between 1976 and 1990.
In December, the court held oral arguments on just the standing issue and later held that the leagues did have standing to bring the suit. The Department of Justice later intervened in the lawsuit to defend the constitutionality of PASPA.
New Jersey filed its opening brief in April and will have the opportunity to file a reply brief by June 14 to the briefs submitted by DOJ and the sports leagues. Oral arguments are scheduled for June 26. New Jersey is challenging both the constitutionality of PASPA and the leagues’ standing to bring the case.
Also in April, the attorneys general from Georgia, Kansas, Virginia and West Virginia filed an amicus brief with the Third Circuit in support of reversal of the district court’s ruling, on the basis that the ruling threatens the system of dual sovereignty.
A key to this case will likely be how the Third Circuit interprets the anti-commandeering principle recognized by the U.S. Supreme Court in a number of cases. DOJ argues in its brief that PASPA does not offend the anti-commandeering principle and focuses on the fact that the Supreme Court has only applied the principle twice in invalidating a federal law.
DOJ argues that from those two decisions the Supreme Court has established “the basic touchstone of the anti-commandeering doctrine: it applies when a federal law requires a State to enact or implement a federal regulatory program.” In this case, PASPA is not demanding affirmative regulatory action; instead it prohibits New Jersey from sponsoring sports betting. The brief from the leagues points out that the Third Circuit has never held that a statute violates the Tenth Amendment.
The other key constitutional question that the Third Circuit is being asked to address is whether PASPA violates the equal sovereignty principle. New Jersey has argued that because PASPA discriminates among the states by allowing only a few states to offer sports betting, it violates the state’s right to equal sovereignty, which requires any discrimination among the states to be justified by “a showing that a statute’s geographic coverage is sufficiently related to the problem that it targets.” DOJ argues that PASPA does not offend the equal sovereignty doctrine and has traditionally been applied only in the context of States’ admission to the Union, and “has never been understood to invalidate, or even subject to heightened scrutiny, all federal legislation that draws distinctions among particular States.”
Regardless of the decision reached by the Third Circuit, the losing party will have the option of seeking a rehearing en banc in the Third Circuit, or filing for a writ of certiorari to the United States Supreme Court. However, both options are discretionary, leaving the possibility that the ruling from the Third Circuit will be final.
There have been prior challenges to PASPA in federal court, but none of those cases required the court to directly address the constitutionality of the statute, which the Third Circuit is being asked to do here.
The ruling from the Third Circuit in this case will have far-reaching implications. A decision in New Jersey’s favor removes the primary hurdle preventing states from offering sports betting within their borders. A decision that opines on the constitutional issues in the case could have a significant impact in the future on the federal government’s ability to regulate the states.
April 30 was an historic day for online poker players in the United States. Just a bit more than two years after the indictment and civil cases that were termed “Black Friday” shut down the industry, Ultimate Poker became the first live real-money online poker site in the United States after Black Friday.
Nevada became the first state to legalize online poker in June 2011, and the regulations governing online gaming were issued in December 2011. Nevada gaming authorities granted Ultimate Poker a license in October and last week signed off last week on Ultimate Poker’s technology, which allowed them to launch.
Ultimate Gaming, a majority-owned subsidiary of Station Casinos, LLC, is operating UltimatePoker.com. Station Casinos owns sixteen casinos in Las Vegas. Ultimate Poker is the exclusive online gaming partner of the Ultimate Fighting Championship.
Right now, Ultimate Poker is only available to people who are over the age of 21 and are located in Nevada, though you do not have to be a Nevada resident to participate. Players can register and deposit money into their accounts from anywhere in the world, but can only play when they are physically in Nevada. Players can also make deposits and withdrawals at any of Station Casinos’ locations in Las Vegas.
To verify location, Ultimate Poker will triangulate a customers’ cell phone signal, though some cell phone carriers are not participating in the plan yet. Some players reported difficulty when they tried to play on Ultimate Poker on the first day, including issues with the geo-location services and players being unaware that their cell phone carrier was not participating.
Nevada recently passed a bill that would authorize the state to enter into interstate gaming compacts with other states, a reality that became possible after the U.S. Department of Justice released an opinion in December 2011 stating that the Wire Act applied only to sports betting. Liquidity could become an issue for a state with a relatively small population such as Nevada, so interstate compacts could become vital to the long term success of the state’s online gaming industry.
Online gaming is legal in both New Jersey and Delaware, though those states have yet to go live. Nearly a dozen other states have at least considered some form of online gaming legislation in the past year.
We are very happy to see online poker back online again. Some hurdles remain for companies to assure that their products operate smoothly and efficiently, but it is a good day for the industry and players that real money poker is back online.
The state of New Jersey filed its opening brief on April 29 in the U.S. Court of Appeals for the 3rd Circuit, in a case that could ultimately decide the fate of sports betting in the United States.
In February, U.S. District Court Judge Michael Shipp struck down New Jersey’s new sports betting law, finding it invalid as conflicting with federal law. The federal law at issue is the Professional and Amateur Sports Betting Act of 1992 (PASPA), which prohibits any state from offering sports betting unless the state had a sports betting scheme in place between 1976 and 1990.
In 2011, New Jersey voters approved a referendum by a 2-1 margin to amend the state’s constitution to allow sports betting in the state’s casinos and racetracks. The state legislature then passed a bill legalizing sports betting in the state and it was signed into law by Gov. Chris Christie (R). The New Jersey law would allow wagering on all major professional and collegiate sporting events, except collegiate sporting events involving New Jersey colleges, and on all sporting events, professional or collegiate, taking place in the state.
In August, the four major professional sports leagues and the National Collegiate Athletic Association (NCAA) filed suit against New Jersey arguing that the sports gambling law violated federal law. The U.S. Department of Justice (DOJ) later intervened as a plaintiff in the suit, joining the leagues.
The district court agreed with the plaintiffs and held that PASPA was a rational exercise of congressional power.
There have been prior challenges to PASPA in federal court, but none of those cases directly addressed the constitutionality of the statute, which the Third Circuit is being asked to do in this case.
New Jersey argues that PASPA is unconstitutional because it violates the anti-commandeering principle that Congress may not “require the States in their sovereign capacity to regulate their own citizens.” The Third Circuit’s view on the application of the anti-commandeering principle to PASPA is likely the key to this case for both sides. The district court held that PASPA did not violate the anti-commandeering principle because the doctrine is limited to laws that require some affirmative act by a state, and here New Jersey does not have to affirmatively take any action under the law.
New Jersey argues in its brief that there is no doctrinal basis for this requirement of affirmative conduct for “commandeering,” and that PASPA’s requirement to maintain existing laws is indistinguishable from a requirement to pass new laws. New Jersey cites case law stating that the anti-commandeering precedent turns on whether a law seeks “to control or influence that manner in which States regulate private parties.”
New Jersey also argues that PASPA violates the principle of equal sovereignty, which requires any discrimination among the states to be justified by “a showing that a statute’s geographic coverage is sufficiently related to the problem that it targets.” New Jersey argues that PASPA plainly discriminates among the states and that sports wagering is not the type of “local problem” that justifies different treatment among them. The justification in PASPA for the different treatment of the states was that some states already permitted sports wagering, a difference that does not justify the different treatment between the states.
New Jersey also challenged the leagues’ standing to bring the suit, arguing that although PASPA granted the leagues a right of action to enforce PASPA, “that act does not alter Article III’s jurisdictional requirements.” A separate hearing on just the standing issue was held by the district court in December, and the court found that the leagues did have standing to bring the suit. New Jersey argued that the district court relied on the general harm caused by illegal sports wagering, but that this harm was not traceable to the legalization of sports wagering in New Jersey. New Jersey also noted that the district court placed heavy emphasis on the 3rd Circuit decision in Office of the Commissioner of Baseball v. Markell, a decision that did not address the issue of standing.
The state argues that the standing of DOJ to enforce the law is irrelevant here because “intervention will not be permitted to breathe life into a ‘nonexistent’ law suit.” The court will sometimes treat the pleadings of an intervenor such as DOJ as a separate action, but New Jersey argues that this would not be justified here since DOJ’s intervention cannot be construed as a separate action because it did not sue to enforce the law; rather, DOJ intervened to defend PASPA’s constitutionality.
Intervenor defendants, the New Jersey Thoroughbred Horseman’s Association, Inc. as well as State Senate President Stephen Sweeney and Speaker of the New Jersey General Assembly Sheila Y. Oliver, also filed briefs arguing that PASPA is unconstitutional.
The deadline for the response from the leagues is May 23 and New Jersey will have an opportunity to file a reply brief by May 30. Oral arguments are scheduled in the appeals court on June 26.
The ruling in this case will have very far-reaching implications. A decision in favor of New Jersey will allow states to offer sports betting within their borders. It was not surprising that the district court ruled that New Jersey’s sports wagering law was invalid, but the law may have a different fate in the 3rd Circuit. New Jersey has some very compelling arguments that PASPA is unconstitutional and later this year we will find out if the appeals court agrees.
On March 19, 2013, the New Jersey Office of the Attorney General, Division of Gaming Enforcement (DGE), announced that it has adopted temporary regulations authorizing the state’s casinos to offer fantasy sports tournaments to their patrons. The regulations permit casinos, on their own or in partnership with fantasy sports providers, to offer fantasy sports tournaments or contests.
The temporary regulations will remain in effect for a period of 270 days. During that time, the DGE will propose the regulations for final adoption. The text of the regulations could change from their current form to the form that is eventually adopted. The regulations will become effective on April 22, 2013. The minimum age for participation in fantasy sports tournaments at casinos is 21. Full text of the temporary regulations is available here.
A fantasy sports tournament is a simulated game in which a player manages an imaginary sports team and competes for a monetary prize against teams managed by other players. Since fantasy sports involve considerable skill in the selection of teams and players, they are widely considered not to constitute gambling. Fantasy sports can involve season-long or single-day tournaments.
The New Jersey temporary regulations clearly define that all prizes and awards must be made known to all participants prior to the start of the tournament. The winning outcome of a fantasy sports tournament shall reflect the relative skill of the participants and the outcome cannot be determined solely on the performance of any individual athlete or on the score, point spread, or performance of any single real world team or combination of teams.
The temporary regulations authorize casinos to utilize the casino cage to accept entry fees and pay out winnings from fantasy sports tournaments in the casino. Under the temporary regulations, fantasy sports are not considered to be gambling under state law. Therefore, revenue generated from these games is not subject to the same taxes as revenue generated from table games and other games offered in casinos.
This announcement on fantasy sports is part of a flurry of activity in New Jersey dealing with the state’s gaming industry. Last month, New Jersey became the third state to legalize online gaming within its borders, and games could be online by the end of the year. Earlier this month, a federal judge in New Jersey struck down the state’s sports betting law and the decision has been appealed by the state to the U.S. Court of Appeals for the Third Circuit.
We are very happy to see New Jersey add fantasy sports offerings in its casinos. This will be a boost for the state as well as for patrons who will soon be able to play these games in casinos.
On February 28, 2013, the Virginia Supreme Court issued an opinion in which it declined to address the legality of playing poker in the state but left open the possibility for the issue to be decided in a future case. The full opinion in the case, Daniels v. Mobley, is available here.
Charles Daniels, a former poker hall operator who operated charitable bingo halls in Portsmouth, Virginia, for decades, filed suit in 2010 seeking a declaratory judgment that Texas Hold ‘em poker is legal under Virginia’s gambling statute.
Under Virginia law, “illegal gambling” is defined as:
“the making, placing or receipt of any bet or wager in the Commonwealth of money or other thing of value, made in exchange for a chance to win a prize, stake or other consideration or thing of value, dependent upon the result of any game, contest or any other event the outcome of which is uncertain or a matter of chance, whether such game, contest or event occurs or is to occur inside or outside the limits of the Commonwealth.”
The law also states that:
“Nothing in this article shall be construed to prevent any contest of speed or skill . . . where participants may receive prizes or different percentages of a purse, stake or premium dependent upon whether they win or lose or dependent upon their position or score at the end of such contest.”
Daniels argued that the outcome of Texas Hold ‘em poker is determined by skill and not luck and therefore the game does not violate the Virginia statute. In the circuit court Daniels presented testimony of two math experts and a world champion poker player to support the skill argument.
The lower court ruled that poker was a game of chance, stating that “all the evidence indicates that the outcome of any one hand is uncertain.” Daniels then appealed the case to the Virginia Supreme Court.
The state Supreme Court declined to address the legality of poker, holding that the court could not rule on the case because the request for a declaratory judgment on the status of Texas Hold ‘em poker “failed to present a justiciable controversy over which the circuit court could exercise jurisdiction.” Since there was no justiciable controversy, the Supreme Court held that the circuit court did not have jurisdiction to rule on the claim.
The court did not directly address the argument that poker is a game of skill and not chance, an argument that has been accepted by other courts. It thus left the door open for the argument to be made in the future.
Daniels also argued that the state’s anti-gambling statute is unconstitutionally vague. The Supreme Court affirmed the ruling of the circuit court that the statute is not unconstitutionally vague because it gives fair notice and an individual of ordinary intelligence can discern its meaning.
In our view, poker is a game of skill and not chance and thus should not be considered gambling under the Virginia statute. The Virginia Supreme Court’s decision to rule on other grounds left poker supporters with a lost opportunity, but there will be other opportunities to make the argument in this and other courts.