The Legality of Fantasy Baseball

With opening day just a few weeks away, fantasy baseball season is officially upon us. And while some fantasy participants play solely for the love of the game, many others enjoy wagering some money on their team(s) as well. However, because gambling is prohibited in a number of states, this raises the question: is your fantasy baseball league legal?

This is a tougher question to answer than one might initially assume. Not only are there a host of different federal and state gambling laws potentially applying to fantasy baseball, but differences in the type of league one participates in (season-long vs. partial-season competition, live vs. automated draft) may also result in varying legal treatment.

To begin, the primary federal gambling laws do not appear to apply to most fantasy baseball leagues. The Uniform Internet Gambling Enforcement Act (UIGEA), for instance, contains a specific carve-out for fantasy sports games in which the outcome is “determined predominantly by accumulated statistical results of the performance of individuals … in multiple real-world sporting events.”

Meanwhile, although the Professional and Amateur Sports Protection Act (PAPSA) would appear to apply to many fantasy baseball leagues, the law does not appear to have been intended to cover fantasy sports competitions. PAPSA was originally passed at the request of Major League Baseball, the National Football League and the National Basketball Association in 1992 in an effort to curb more traditional forms of gambling on the outcome of sporting events. Considering the degree to which these leagues have endorsed fantasy sports in recent years, they would likely oppose an effort to apply PAPSA to most fantasy sports leagues.

So the legality of a particular fantasy baseball league is likely to hinge on the applicable state law, rather than federal law. Because different states define the concept of gambling differently, however, the legality of fantasy baseball can vary widely from state-to-state. Luckily, Professor Marc Edelman has compiled a helpful summary of the various applicable state laws.

Most state laws define the term “gambling” to mean a transaction consisting of three elements: (i) consideration, (ii) a potential prize, and (iii) some degree of chance. Consideration is a legal concept involving the exchange of something of value, most often money. So in most states, participation in a free fantasy league will raise no legal concerns, since participants are not providing anything of value in exchange for the right to compete. Leagues requiring their contestants pay an entry fee, however, would satisfy the consideration requirement.

Similarly, most states also require that some sort of prize be awarded in order for a contest to qualify as gambling. So participating in a fantasy league that does not offer its contestants a season-ending prize would not run afoul of the law in most states. But leagues that provide a monetary reward to their champions – or, potentially, even something as simple as a plaque or trophy – would satisfy this second element under most states’ gambling laws.

For those leagues that do require contestants to pay an entry fee, while also providing participants with some sort of end-of-season prize or reward, the league’s legality will hinge on the third element under most states’ gambling laws: the degree of chance involved. In other words, states consider the extent to which a contest’s outcome is based on luck – as opposed to the judgment or skill of the participants – when determining whether it constitutes unlawful gambling.

Here, state laws vary considerably regarding the degree to which luck can permissibly affect a contest’s outcome. Most states apply a “predominant purpose” test, in which a contest will be considered unlawful gambling if its outcome is based more on chance than skill. But if the contest’s outcome is predominantly determined by the contestants’ judgment or skill, then it does not qualify as gambling and thus is considered legal.

The extent to which a fantasy baseball league’s outcome is based on chance could vary depending on several factors. For example, in a league where the contestants initially pick their teams themselves – through a draft or auction – then luck would seem to play a lesser role in determining the contest’s outcome, likely making the league lawful under most states’ laws. But in leagues where team rosters are determined on a random basis – such as through an auto-pick function – then one could argue that the contest’s outcome is predominately determined by luck, and not the participants’ skill or judgment.

Similarly, the longer that a fantasy league’s season runs, the more likely it is to be legal. The outcome of a season-long league, for instance, will be driven to a greater extent by the contestants’ skill than a league whose season lasts only a few weeks, as the shorter duration will allow luck to play a larger role in determining the winner.

Along these same lines, daily fantasy sports – a relatively recent phenomenon in which a winner is determined based entirely on a single day’s results – are especially susceptible to being considered unlawful gambling under most states’ laws. While daily fantasy sports undoubtedly involve some degree of skill, given the small sample size involved one could easily determine that luck outweighs the participants’ judgment, arguably rendering these contests illegal in most states. (To date, daily fantasy sports competitions have avoided prosecution under state gambling laws.)

In most cases, though, a traditional, season-long fantasy league in which the participants select their own team rosters would appear to be legal under most states’ gambling laws, even if they charge an entry fee and award a prize.

That having been said, a few states do impose a stricter limit on the degree to which luck can affect a contest’s outcome in order for it to be considered unlawful gambling. In particular, Arkansas, Iowa, Louisiana and Tennessee have all adopted an “any chance” standard, in which a contest will be illegal if its outcome is determined to any extent by luck. Considering that any fantasy team’s success depends to some extent on chance – injuries, etc. – most fantasy baseball leagues would appear to run afoul of these states’ gambling laws (assuming they charge an entry fee and award a prize).

Meanwhile, other states have specifically prohibited fantasy sports leagues that award a cash prize. Both Florida and Kansas have declared that it is illegal under their state’s law for residents to participate in a fantasy sports league where contestants pay an entry fee and compete for prize money. Finally, both Arizona and Montana prohibit fantasy sports leagues in which the host site retains a percentage of the participants’ entry fees.

As a result, some fantasy baseball providers – such as ESPN, for example – refuse to allow residents of some of these states to register for their prize leagues.

Even if you happen to live in a state where the legality of fantasy baseball is in doubt, however, prosecutions for fantasy-sports-related violations of state gambling laws are quite rare. The greater risk, then, may be that a state decides to crack down on a fantasy baseball host site, in which case those participating in a league hosted by the site could be in danger of losing their entry fee and/or championship prize. Poker players, for instance, had their accounts frozen a few years ago when the federal government decided to prosecute various online poker sites under federal gambling laws.

Overall, though, most traditional fantasy baseball leagues – even those requiring an entry fee and awarding a cash prize – would appear to be legal in the overwhelming majority of states, due to the degree to which judgment or skill is involved.

Note: This information is provided solely for informational purposes, and should not be construed as legal advice.