This week, the state of Mississippi became the fourth state this year to enact a statute regulating daily fantasy sports. The Mississippi legislature took action after its Attorney General issued an opinion letter in January stating that playing fantasy sports constituted illegal gambling under state law. Mississippi residents can begin playing fantasy sports legally on July 1st.
The Mississippi statute applies to all fantasy sports contests offering cash prizes, not just daily fantasy contests. However, it is little more than a temporary reversal of the Attorney General’s opinion: the new statute expires on July 1, 2017 and sets up a task force to explore permanent regulations. For now, fantasy sports operators are required to register with the state, but there are no registration fees. There are minimal prohibitions, such as a minimum age of 18, no sharing of confidential information and a bar against fantasy sports operators and their immediate families from playing. Violators are subject to $10,000 fines. The full text of the law, codified as section 97-33-301 et seq. can be viewed here.
The three states that preceded Mississippi in passing fantasy sports laws are Virginia, Indiana and Tennessee. Both Virginia and Indiana require $50,000 licensing fees, which will serve as a barrier to entry to all but the two major fantasy sports operators, FanDuel and DraftKings. Tennessee’s law, by contrast, imposes a 6% tax on revenue generated from Tennessee residents. Massachusetts’ Attorney General recently promulgated daily fantasy sports regulations that do not require registration, and Kansas excludes fantasy sports from the definition of gambling. Meanwhile, both Missouri and Colorado appear close to enacting statutes of their own.
The situation is much less clear in many other states, particularly New York and Texas, where the attorney generals have filed lawsuits against DraftKings and FanDuel alleging their contests are illegal gambling. On March 21, 2016, New York Attorney General Eric Schneiderman announced that, effective immediately, the two largest operators of daily fantasy sports contests will close their contests to New York residents pending a court hearing scheduled for September. In Texas, DraftKings has filed a lawsuit challenging the Attorney General's opinion that daily fantasy sports are illegal gambling.
TAKEAWAY: The legal landscape for the fantasy sports industry is rapidly evolving. Anyone considering offering fantasy sports contests must make sure they are acting within current laws, which are changing on a monthly basis.
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