Alabama Attorney General: Daily fantasy sports leagues are illegal gambling

Televisions, smartphones, and computers were flooded during the 2015-2016 football season with advertisements for a relatively new form of fantasy sports. Between FanDuel and DraftKings, sports fans across the country were inundated with commercials promising a fast-paced game with the potential for high payouts. But on Tuesday, Alabama Attorney General Luther Strange sent cease-and-desist letters to two Daily Fantasy Sports companies, after determining that paid daily fantasy sports contests constitute illegal gambling.

In daily fantasy sports (DFS), participants pay to create a roster of players, then pit their roster against those of other participants. Whomever’s roster performs the best that day within a certain pool wins prize money through the site.

“As Attorney General, it is my duty to uphold Alabama law, including the laws against illegal gambling,” said Strange in a news release Tuesday afternoon. “Daily fantasy sports operators claim that they operate legally under Alabama law. However, paid daily fantasy sports contests are in fact illegal gambling under Alabama law.”

According to Alabama code section 13A-20-12, a person participates in gambling if he or she “stakes or risks something of value upon the outcome of a contest of chance or a future contingent event not under his control or influence, upon an agreement or understanding that he or someone else will receive something of value in the event of a certain outcome.”

Gambling in Alabama is illegal, with a few exceptions including buying securities and commodities, insurance, and some grandfathered activities.

DFS sites often contend they are games of skill, not of chance, and thus aren’t covered under most states’ gambling laws, but Strange contends this is not sufficient to keep them legal in Alabama.

“There is, of course, a measure of skill involved in creating a fantasy roster,” wrote the AG’s office. “But in the end, contestants have no control over the performance of the players on their rosters. For example, a player could fall ill before a game, be injured in pre-game warm-ups, or miss a large portion of the game due to injury or equipment failure. All of these factors, and many more, are outside the control of a fantasy sports player. Thus, the results of paid daily fantasy sports contests depend to a large degree on chance.”

Two bills currently stalled in committee, SB114 by Sen. Paul Sanford (R-Huntsville) and HB56 by Rep. Connie Rowe (R-Jasper) would each establish regulatory rules regarding fantasy sports games in the state. The bills would require contest operators to institute procedures for consumer protection, require audits of operators and provide penalties for those operating outside of the established regulations.

Were they to be passed, the bills would undo Strange’s decision, making the industry immune from being considered a gambling operation in the state.

AG Strange says Alabama is the twelfth state to declare DFS to be illegal.