Laws About Fantasy Sports Leagues Are a Mess

Daily fantasy sports sites have been operating on shaky legal ground in about a dozen states.

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The New York attorney general's decision that daily fantasy sports betting sites FanDuel and DraftKings are illegal gambling operations in his state is a blow to the companies, but the multibillion-dollar industry could have more legal headaches yet to come.

While the sites have opted not to do business in a handful of states, including Washington, where regulators have made clear they're not welcome, they have been up and running in a number of others -- like New York -- where they're legally dubious. Several states in which the companies are operating have laws similar to New York and Washington, while a few, such as Tennessee, Arkansas and Vermont, have even stricter prohibitions.

That could pose more risk than the companies or their backers -- big media companies and professional sports leagues -- have let on. Federal law criminalizes gambling businesses that operate in violation of state law, with penalties that can include prison time, fines and seizure of assets.

"This creates a real vulnerability for the industry," said Daniel Wallach, a sports and gaming lawyer in Florida. "That statute gives the government the power to take it all away. They can shut you down."

 

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Daniel Luzer is GOVERNING's news editor.
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