8 Legal Challenges Of Major League Baseball’s New ‘Daily Fantasy Sports’ Partnership With DraftKings

Forbes: By Mark Edelman

Last Friday, Major League Baseball announced that it has become an investor in the “daily fantasy sports” website DraftKings — ending a nearly a 95 year period during which Major League Baseball opposed anything even roughly associated with sports gambling. It is now rumored by the Wall Street Journal that Walt Disney DIS +0.17% may join Major League Baseball as an equity investor in DraftKings as early as this Friday.

For Major League Baseball, its newest investment in “daily fantasy sports” provides a desirable opportunity to potentially profit from a rapidly emerging marketplace. Nevertheless, this investment is also fraught with eight legal challenges that Major League Baseball should address upon taking this new equity stake:

1. Does DraftKings operate in any states where all of its contests are illegal? Currently, DraftKings disallows participants from entering its games in five states where it perceives the gambling law risks as most elevated: Arizona, Louisiana, Iowa, Montana, and Washington. However, there are other states where operating “daily fantasy sports” seems to be a very high risk activity. For example, statutory law in the State of Tennessee seems to disallow contests that involve any chance whatsoever. The same may be true under Arkansas common law. Nevertheless, DraftKings (much like its rival, FanDuel) still operates in both of these states.

2. Does DraftKings do enough to block users in these impermissible states? The publicly traded sportsbook, the William Hill Co. recognizes that it is so critical that those based on U.S. soil not access their website that they use Internet Protocol Tracking Technology to prevent those based in America from even getting to the website’s front page. To ensure legal compliance in the states that clearly disallow play-for-cash fantasy sports, DraftKings may wish to implement Internet Protocol Tracking Technology to block the entirety of its website from users – thus preventing any mistake or confusion about legality of accepting money from such states.

3. Does DraftKings operate any contests that are illegal in their entirety? DraftKings currently offers ”daily fantasy sports” contests in individual sports such as golf even though these contests are based in their entirety on player performance within a single tournament. The decision to offer daily fantasy golf seems imprudent because even the Unlawful Internet Gambling Enforcement Act’s narrow carve-out for “fantasy or simulation sports” requires that the contest results emerge from accumulated player statistics in “multiple real-world sporting or other events.” A single golf tournament reasonably may not constitute a multiple events under this definition, and thus DraftKings’s version of fantasy golf should face a heightened risk of criminal challenge. (Note: as I recently told Golf.com, this problem could easily be fixed by combining two golf tournaments; however, DraftKings has simply failed to do this).

Full credit to Forbes.com – seen here: http://www.forbes.com/sites/marcedelman/2015/04/08/8-legal-challenges-of-major-league-baseballs-new-daily-fantasy-sports-partnership/