Monday, 27 August 2012

Legal Issues in Fantasy Sports: Yahoo! More Risk Averse than CBS Sports

As I had predicted last year in my law review article, A Short Treatise on Fantasy Sports and the Law, it was only a matter of time before another public company joined CBS Sports in the cash-prize fantasy football marketplace. As anticipated, Yahoo! has recently announced its launch of Yahoo! Pro Leagues, which are leagues offering up to $500 in cash prizes to fantasy football winners.

Nevertheless, in launching its pay-to-win fantasy football game, Yahoo! seems to be a tad more risk averse than CBS Sports. For example, even though the CBSSports Terms of Service only prevent the paying of prizes to winners in six states (Arizona, Iowa, Louisiana, Montana, Vermont and Washington), the Yahoo! Sports Terms of Service disallows prizes in two more -- Maryland and Illinois.

Yahoo!'s decision not to compete against CBS Sports in either Maryland or Illinois is likely based on the uncertainties in both states' gaming laws. In Maryland, the state governor recently signed into law a bill that exempts certain online fantasy sports games from its gambling prohibitions, and instead grants the state Comptroller the right to regulate the industry. However, to date, the state Comptroller has not issued any regulations related to fantasy sports. Presumably, CBS Sports believes this puts them in the clear to move forward with offering prize-based games.  Meanwhile, Yahoo! is not willing to take that risk. 

Similarly, in Illinois, one section of the state’s gambling law specifies that a person commits a gambling offense if he “[k]nowingly establishes, maintains, or operates an internet site that permits a person to play a game of chance or skill for money or a thing of value.” Yet, another section of that same statute exempts from the law “any bona fide contest for the determination of skill, speed, strength,or endurance.” CBS Sports must be confident that its fantasy football contest is a "bona fide contest for the determination of skill."  Meanwhile, Yahoo! might be less sure, perhaps based on a 1983 Illinois decision that found poker did not fall into this exemption.

Most interesting to me, however, is that even though Yahoo has taken a more risk averse approach than CBS Sports, it still does not outlaw its game in a number of states where some risk may still exist. For example, Yahoo! is willing to pay cash prizes to contestants in Kansas, even though last fall the Kansas Racing and Gaming Commission had language on its website indicating that pay-to-win fantasy sports games were illegal. In addition, Yahoo! is willing to operate in at least one state where a former attorney general has issued an advisory opinion indicating that fantasy sports games are illegal.

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