Fantasy sports ban included in Net gambling bill

Many thousands of players who vie for cash or prizes in online fantasy sports leagues would find themselves clearly on the wrong side of the law -- and subject to being fined or jailed -- under a previously unnoticed but not unintended provision of a pending bill designed to outlaw Internet gambling.

Many thousands of players who vie for cash or prizes in online fantasy sports leagues would find themselves clearly on the wrong side of the law -- and subject to being fined or jailed -- under a previously unnoticed but not unintended provision of a pending bill designed to outlaw Internet gambling.

The legality of the popular contests, in which players draft and manage a stable of athletes in a particular sport and compile points based on their performance, has previously been the subject of considerable debate.

ZDTV CyberCrime special: What's the deal with gambling on the Net?

But pending legislation by Sen. Jon Kyl, R-Ariz., would halt the debate by making fantasy sports leagues that charge sign-up fees and offer prizes to top players clearly illegal. And, for the first time, it would subject players in such leagues to possible prosecution on a federal charge that carries a maximum penalty of three months in prison and a $500 fine.

Hundreds of Web sites currently offer information and assistance to fantasy league players - estimated to number in the hundreds of thousands - and dozens offer pay-to-play games, including MSNBC. Only those sites that charge fees, which typically range from under $10 to several hundred dollars, would be affected if Kyl's bill is signed into law.

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Kyl's spokesman, Vincent Sollitto, denied that the bill would change current federal law on gambling, saying it merely applies existing law to new technologies, such as the Internet and satellite transmissions.

"Nothing that is currently legal would be outlawed by the bill," he said. "The bottom line is that if these sports fantasy leagues are currently illegal, they would remain so. If they are legal, they would remain legal."

Definition seen as problematic
But several gambling-law experts said that a provision of Kyl's bill that defines "bets and wagers" clearly prohibits what is merely questionable under current federal law.

Under the Kyl bill, bets or wagers constitute "the staking or risking by any person of something of value upon the outcome of a contest, sporting event or game of chance, upon an agreement or understanding that the person or another person will receive something of value in the event of a certain outcome."

Current federal law governing gambling does not define the terms, wherein lies the problem, said Anthony Cabot, a Las Vegas attorney and leading authority on Internet gambling and the law.

"Right now the law just says bets or wagers are illegal over the wire," he said, which would force a court considering a fantasy sports case to go to case law for a definition of what constitutes a "bet or wager."

"Traditionally, the notion of a bet or wager is anything that has three elements: prize, consideration and chance," Cabot said. "Under the new Kyl bill, they basically eliminate chance and define bets or wagers to mean staking or risking anything of value on the outcome of a contest or sporting event. ... And fantasy leagues, in particular, have always relied on the fact that skill predominates over chance and keeps them out of the realm of being considered a gambling game."

"I'm not saying whether they are legal or not under current law, but it's clear that the definition in the Kyl bill is more restrictive than the common law definition," he said.

Is it skill, or chance
Nelson Rose, a professor at Whittier College School of Law who specializes in gambling issues, agreed that the Kyl bill would expand federal gambling law.

"The courts have construed a wager as meaning a game of chance, or predominantly a game of chance," he said. "But the Kyl bill is designed to broaden that. If they were going to be careful about it, they should put language into the statute that says this is designed to include money staked where the outcome is determined largely by skill."

Even if the current case-law standard was used, there is no guarantee that a court would agree that sports fantasy leagues are "games of skill," both experts said.

"A game of skill is not one that somebody of exceptional skill can beat," said Rose. "It has got to be the average player, which means that blackjack and sports betting are going to fail because such a small percentage of players are able to win consistently."

Given that chance pervades all human activity, making such a determination is often not easy, he said.

Displeasure predicted
"I've heard it said that court cases are contests that depend on skill, but certainly a lot of luck is involved as well and the outcome is something of value," Rose said.

An official of CDM Fantasy Sports in St. Louis, which runs the fantasy games on MSNBC, was shocked to learn that the Kyl bill could put him out of business.

"Some big people in big places aren't going to like it," said the official, who declined to give his name. "My guess is that this is an area they will have to pull out of there if they want to get [the bill] through."

The official said CDM, which also conducts fantasy sports games for USA Today, the Sporting News and among others, gets tens of thousands of players for MSNBC's contests alone and estimated that "at least half a million people play some kind of fantasy game on the Net."

Officials of ESPN's Sportszone and CBS Sportsline, which offer similar games, did not immediately return phone calls seeking comment.

Linda Goldstein, a partner with the legal firm of Hall, Dickler, Kent, Friedman and Wood, which represents MSNBC and CDM, said she planned to push to have the language rewritten before the bill reaches the Senate floor, likely sometime this spring.

Lobbying for a rewrite
"There is language in the Kyl bill that would effectively eliminate games of skill ... not only fantasy games but any skill contest with an entry fee, including some Internet trivia games or interactive entertainment games," Goldstein said. "We don't believe that was the intent and we intend to make an active effort to change this language."

Sollitto, Kyl's spokesman, acknowledged that the bill intended to crack down on "people [who] have attempted to camouflage their activities by pretending they're offering skill-based prizes."

But he denounced what he called the "bizarre concept that we are somehow outlawing fantasy sports."

"I reject the notion that our bill is doing something toward this particular area," he said. "Perhaps people are concerned that their gray area has been removed. But just because no one has been prosecuted [for running a fantasy sports league] doesn't mean that they couldn't be."

Opponents of Kyl's bill - primarily players in the emerging interactive gambling industry - gleefully seized on the fantasy sports issue to criticize the bill.

'Overbroad and misguided'
"This demonstrates how overbroad and misguided Mr. Kyl's efforts are," said David Safavian, a lobbyist for the Interactive Gaming Council, an industry trade group. "If Mr. Kyl's bill weren't so poorly drafted, he wouldn't have had to make exceptions for racetracks, hotel casinos and state lotteries."

And even an ardent supporter suggested that Kyl's desire for exactitude in drafting the bill was probably a mistake - though for different reasons.

"Current [federal] law does not make a distinction between games of chance and games of skill," said Bernie Horn, head of the National Coalition Against Legalized Gambling. "...This is a federal law that has been in existence for 30 years or more and has gotten along perfectly well without a definition of what betting or wagering is - since we all know what that is."

Max Rubin, a free-lance writer who has played fantasy sports since 1969, said he isn't sure how betting and wagering should be defined in Kyl's bill. But he expressed no doubt that fantasy sports should not rise to the threshold.

"It really takes away a lot of innocent fun from just the average recreational sports fan, who's not your traditional sports bettor, either," he said. "You'll find ... that the fantasy bettor isn't the guy that gets out there and deals with a bookie and that sort of thing. It's much more along the office pool type of situation."


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