6 Things Every Fantasy Football Participant Should Know
Approximately 33 million friends, family, co-workers, and strangers linked by a mutual goal gather to role play managing their own professional football team. Therefore, today seems like an appropriate time to talk about the history, legal questions, and various effects of the fantasy sports phenomenon that will consume the minds of the American public – regardless of their football fanatic status – for the next seventeen weeks (or even longer for the “skillful” playoff qualifiers).
1. You may hear some founding fathers shouting, “Go Blue!” That is the Michigan difference.
First, every fantasy sport participant should do themselves a favor and watch ESPN’s 30 for 30 chapter “Silly Little Game” to hear the story from the original baseball Rotisserie League’s founders. The early stages of fantasy sports can be traced back to William Gamson, who brought his “Baseball Seminar” idea from Harvard to the University of Michigan where some professors formed rosters and earned points based on particular baseball player statistics. Bob Sklar was one of those professors, and Daniel Okrent, one of Sklar’s students, learned of the game and in 1980 invented Rotisserie League Baseball (i.e., “roto”). The difference between Gamson’s game and Okrent’s game is that the former’s scores took players’ statistics from the final standings whereas the latter’s scores takes players’ fluctuating statistics during the ongoing season. The first roto draft took place in New York City’s La Rotisserie Francaise restaurant. Interestingly, Okrent still plays roto but has never won the title of league champion.
2. The economic effect is astounding.
Fantasy sports is an estimated $4 billion industry that reduces productivity in the workplace and may cost employers to lose more than $13 billion in work product. Lost productivity aside, fantasy leagues have team-building qualities that also increase workplace morale. So, fantasy sports are a significant distraction, but they are a distraction that society has come to embrace. Fantasy sports is the Kim Kardashian: Hollywood app (now worth $200 million) for people who are not eight- to sixteen-year-old girls.
3. Congress gave us the green light to play fantasy sports.
Since fantasy sports and its gambling aspects exponentially gained popularity with the Internet, Congress instinctively reacted. In 2006, Congress amended the SAFE Port Act to add the Unlawful Internet Gambling Enforcement Act (UIGEA). UIGEA prohibits “gambling businesses from knowingly accepting payment in connection with the participation of another person in a bet or wager that involves the use of the Internet and that is unlawful under any state or federal law” and has a special exception for fantasy sports carved out. In summary, the online fantasy sports betting exemption protects participants so long as: (1) the prize “pool” is established and made known to participants beforehand, and it is not based on the number of participants or their individual bets; (2) the outcome reflects the participants’ knowledge and skill (rather than chance) and the calculated statistical results of real-world performances; and (3) the winner is not based solely any single performance by an individual athlete in one event.
4. Case law tries to elaborate on the federal exemption, but it could place greater emphasis on the skill component.
So, given what UIGEA states, what makes an online fantasy league with betting or a buy-in and pooled winnings at the end of the season different from online poker? “Skill.” The major litigated element here is the distinction between a game of skill and a game of chance. In Humphrey v. Viacom, a New Jersey district court reinforced UIGEA’s plain language. The plaintiff argued that online fantasy sports constituted illegal gambling because the entry fee is a wager for a chance to win a prize, but the court held that pay-to-play fantasy leagues do not constitute gambling within UIGEA’s meaning because “(1) the entry fees are paid unconditionally, (2) the prizes offered to fantasy sports contestants are for amounts certain and are guaranteed to be awarded and (3) [ESPN, Inc., Sportsline.com Inc., and Vulcan Sports Media] do not compete for the prizes.” The prize is fixed and often comes in nominal form such as memorabilia.
Most notably, though, the court ruled that “the success of a fantasy sports team depends on the participants’ skill in selecting player for his or her team, trading players over the course of the season, adding and dropping players during the course of the season and deciding who among his or her players will start and which players will be placed on the bench.” This reminds me in a distant but paralleling fashion of the "transformative element" in intellectual property law that Keller v. EA and Hart v. EA highlight (analyzing whether a celebrity's likeness is the very substance of the work or whether the value comes from significant transformative elements) because the value of a fantasy team comes from the participants' skill and artistry in managing a team rather than the sheer luck of an individual athlete performing well or poorly. Any other ruling would make each individual fantasy sport participant and organizer subject to federal lawsuits and likely end the fantasy sport industry, or at least its mainstream state. Fantasy sports does involve a great deal of finesse with obvious de minimis elements of chance (e.g., unanticipated player injuries), and making season-changing trades feels like an art form, but if it is a game of skill, why can’t the inventor of modern fantasy sports win at his own game? While legal battles are bound to continue, the popularity of fantasy sports can keep the industry legally alive.
5. Be careful in relying on a fantasy league provider's list of prohibited states because even if a contest complies with federal law, it must also comply with a stricter state law, if applicable.
Think of the federal law here as a floor - a state cannot have a law that is more lax on the topic, but since Congress allows the states the right to enact stricter standards than in UIGEA, state laws vary widely across the board. States whose regulations seem to be more strict than federal law include Arizona, Arkansas, Iowa, Louisiana, Montana, and Tennessee because in these states, contests that involve "any chance" violate state gambling laws or require strict scrutiny in evaluating each case, and a pay-to-play fantasy sports contests seemingly violate these states' gambling laws. For example, ESPN's legal rules provide that for "premium leagues," where participants pay an entry fee, "RESIDENT[S] OF ARIZONA, IOWA, LOUISIANA, MARYLAND, MONTANA, NORTH DAKOTA, TENNESSEE, VERMONT, OR WASHINGTON STATE, YOU ARE PERMITTED TO MAKE A PURCHASE AND PLAY IN PREMIUM LEAGUES, BUT [THEY] ARE NOT ELIGIBLE TO WIN ANY PRIZES LISTED." Therefore, always be sure to check your state's laws because even if your state is not listed as prohibited in your provider's rules, participation could still be illegal in your jurisdiction.
6. The NFL has always claimed to be 100% against gambling, and because it is finally taking full advantage of UIGEA's fantasy football exemption, it should revamp its stance to retain credibility.
While addressing the NFL's stance against all shapes and sizes of gambling, NFL commissioner Roger Goodell said, "Fantasy's a different issue for us. We see families getting together. It's not about wagering. They're competing against one another. And it's a fun forum for our fans to engage in the game." Yes, there is no denying the value fantasy football has added to the professional sport, but it is safe to say that many participants enjoy fantasy football for more than just bragging rights and pride. Goodell dances around the topic and earns what a dance competitor might say is deserving of a High Silver award - enough to get by but by no means meaningful.
This season, the NFL became the first major professional sports league to host its own pay-to-play fantasy sports contests with the new NFL Fantasy Ultimate Experience League. There is no shame in accepting what federal law deems legal, and the NFL could use the law as a credibility booster. One could argue that the NFL is now going against Goodell's prior statement and embracing one form of gambling that just happens to be legal under UIGEA, for an exemption to a law can be interpreted as acknowledging that the thing at issue would fall under the law if not for the stated exemption. By instead saying that it is against all forms of illegal gambling, if fantasy sports is viewed as legal gambling, people would not roll their eyes at the NFL's meaningless responses to a question with merit.
The NFL-operated platform has entry fees ranging from $10.99 to $124.99 and offers prizes including memorabilia. Residents of seven states - Arizona, Illinois, Iowa, Louisiana, Montana, North Dakota, and Washington state - are prohibited from participating because it feels the element of chance may be dominant enough to make the contest illegal in those states. It is interesting that the NFL does not list Tennessee, a regularly included state on lists stating where fantasy contests are prohibited, or Florida, a state listed as prohibited on Sports Illustrated's Fan Nation app.