The (Il)Legality of Online Fantasy Sports and Texas Hold ’Em Under Federal Law

In light of the Texas Attorney General opinion that online paid daily fantasy sports leagues (fantasy sports) are illegal under Texas law, the Texas House Committee on Licensing and Administrative Procedures approved a bill that would legalize fantasy sports in Texas.[1] The arguments that favored legalizing fantasy sports were remarkably similar to the arguments made in favor of legalizing online poker a few years ago—that they are predominantly games of skill. While it is fairly clear that, under current Texas law, both online fantasy sports and online poker are criminal acts, the question remains as to the legal status of these games at the federal level. There are two main federal statutes that govern gambling—the Illegal Gambling Business Act (IGBA)[2] and the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA).[3]

Lawful to Participate, Unlawful to Facilitate – IGBA

The IGBA makes it a federal crime to conduct, finance, manage, supervise, direct, or own an “illegal gambling business” (IGB), and a violation is punishable by a fine and up to five years’ imprisonment. An IGB is defined as a gambling business that (1) is a violation of the law of a State or political subdivision in which it is conducted,[4] (2) involves five or more persons who conduct, manage, supervise, direct, or own all or part of the business, and (3) substantially continues operation for more than 30 days or has a gross revenue of $2,000 in a single day.

As discussed in The (Il)legality of Online Fantasy Sports and Texas Hold ’Em in Texas, it is illegal under current Texas law to participate in either fantasy sports or poker, which makes it seem as though participating in either online fantasy sports or online poker would also be a federal crime. However, this is not the case. The IGBA criminalizes only the acts of those who conduct, finance, manage, supervise, direct, or own an IGB—it does not criminalize participation in an IGB. While people who operate websites that allow fantasy sports and poker, at least those who operate outside Texas, would be guilty of a federal crime, mere participants would not.

Lawful to Participate, Lawful to Facilitate for Fantasy Sports but not Poker – UIGEA

The UIGEA prohibits any business engaged in “betting or wagering” from accepting payments from those participating in “unlawful internet gambling.”[5] With limited exceptions, to “bet or wager” means risking something of value on the outcome of a contest, sporting event, or game subject to chance.[6] The UIGEA’s definition of “bet or wager,” however, expressly excludes fantasy sports, subject to some minor restrictions.[7] In turn, “unlawful internet gambling” means to transmit a bet or wager by using the Internet when such a bet or wager is unlawful under any state or federal law in the state where the bet or wager is made.

Therefore, it is relatively clear that the UIGEA criminalizes the facilitation of online poker, at least in Texas where playing online poker is a state crime. The same would be true for fantasy sports were it not for the express exclusion of fantasy sports from the definition of “bet or wager.” However, just like the IGBA, the UIGEA criminalizes the conduct of websites that facilitate online gambling, but not that of the participants.

Conclusion

Under federal criminal law, only businesses that facilitate online poker face possible criminal prosecution—fantasy sports websites are most likely safe, as they are expressly excluded from the scope of the statute. Participants in online fantasy sports or poker (or other forms of online gambling) can rest easy that mere participation is not a federal crime; whether such conduct is a state crime is another matter.

For more in-depth discussions of federal criminal-law issues, see O’Connor’s Federal Criminal Rules & Codes Plus.


[1] See O’Connor’s Annotations, The (Il)legality of Online Fantasy Sports and Texas Hold ’Em in Texas.

[2] 18 U.S.C. §1955.

[3] 31 U.S.C. §§5361-5367.

[4] For an interesting case discussing this first requirement, see U.S. v. DiCristina, 726 F.3d 92 (2d Cir. 2013).

[5] 31 U.S.C. §5363; see Federal Deposit Insurance Commission, Unlawful Internet Gambling Enforcement Act of 2006 Overview.

[6] 31 U.S.C. §5362(1)(A). This definition is similar to Texas’s definition of “betting.” See Tex. Pen. Code §47.01.

[7] 31 U.S.C. §5362(1)(E)(ix).

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