A Closer Look At The Legality Of Fantasy Pick'em Vs. The House

Dec 08, 2023

Updated Feb. 28

Where does daily fantasy sports sit as a legal product in the United States? It often depends on whom you ask. And the clarity of the legality of the newest iteration — pick’em fantasy, fantasy parlays, fantasy vs. the house, whatever you want to call it — is far from settled.

In this post, I’ll try to provide a survey of where fantasy vs. the house operates and the legal climate where they do (and don’t). I’m not going to tell you if it’s legal or not (except where it’s clearly legal or not based on laws, regulator action, etc.) And there’s a map!

After you get this in your email, I’ll intend to make this a living document that I’ll update over time, if you want to use it as a resource.

First, traditional DFS

But let’s start here: Daily fantasy sports for real money has been in the United States for nearly 15 years now, since the founding of FanDuel in 2009. The “traditional” version of DFS — where you create a roster of athletes that accumulate statistics and you play against other people for money — is verging on settled law, no matter what you think of the product.

FanDuel (and then DraftKings and others) pushed the envelope first, offering DFS as a “game of skill” in upwards of 40 states, arguing a combination of the federal Unlawful Internet Gambling Enforcement Act and game of skill laws at the state level as a legal basis. The velocity and mechanics of DFS are different from seasonlong fantasy contests, but they’re rooted in the same idea.

DFS still exists in a gray area as a “game of skill” in a variety of states, although the number of states where they might face enforcement action (more on that later) seems pretty low. By 2015, some state regulators and attorneys general started saying that DFS contests were running afoul of state laws. That was followed by a very successful wave of lobbying that legalized DFS contests in more than 20 states. All told traditional DFS operators might operate in upwards of 45 states.

Fantasy vs. the house

In the wake of much of the above came the next wave of pushing the envelope. During DFS 1.0, fantasy sports was basically a peer-to-peer product. You played a contest against one or more other people, and the DFS operator took a commission from the contest. The industry started out broadly and in some cases carefully before pushing the envelope even more: contests based on single NFL games or a single round of a golf tournament, for instance.

Then the idea came along that a fantasy “contest” could be a player vs. “the house,” or the same dynamic as a bettor vs. a sportsbook. UIGEA and state fantasy laws dictate that prize pools must be known in advance and any entry must include statistics from at least two players from more than one team. From that emanated the idea that a DFS operator could offer player proposition parlays (ie predicting a player to score over or under one touchdown, to hit a home run, etc.). The fantasy vs. the house product is identical to the parlays offered by sportsbooks in terms of mechanics. It started only with fantasy points, then moved into parlays on any statistics.

A literal reading of UIGEA and state DFS laws can be used to support these fantasy operators’ legal interpretation; in states without a DFS law, the product is far more gray. The big problem (and the reckoning we’re seeing now) is that offering parlays as the house has always been considered to be sports betting. I don’t think I need to tell you that sports betting has been illegal in most of the country in the modern era, and now requires a sports betting license in states that have legalized it.

As a sidebar, we can safely say the intent of UIGEA was not to legalize something that most would consider sports betting. It was meant to protect peer-to-peer fantasy contests; the author of the law said he didn’t even intend to allow for the original version of DFS.

If you want a broad look at how the industry sees its legal status, I encourage you to read this from Underdog Fantasy.

What UIGEA does and what it doesn’t do

More than a decade since daily fantasy sports rose to prominence, people continue to insist that UIGEA gives far more cover to real-money fantasy sports than it actually does. I wrote on it here, but the summary is this: UIGEA only protects the processing of payments for fantasy games and contests that fit the carveout.

Fantasy contests are not “illegal gambling” for the purposes of UIGEA, which sought to stop payment processing for gambling that is taking place illegally in the U.S. The mechanics of fantasy vs. the house do fit the law. UIGEA does not really contemplate or define who the “participants” are in a fantasy game or contest, and it would seem that “the house” could be a participant if you argue the house uses its “knowledge and skill” to compete.

Everyone focuses on the fantasy language in the UIGEA, but that law’s rule of construction is very important in contemplating what it allows and doesn’t:

No provision of this subchapter shall be construed as altering, limiting, or extending any Federal or State law or Tribal-State compact prohibiting, permitting, or regulating gambling within the United States.

That means UIGEA is a pretty narrow law:

Fitting the fantasy carveout does not mean that fantasy contests are automatically “not gambling” under federal law
Fitting the fantasy carveout does not mean that fantasy contests are automatically “not gambling” under state laws.

Here’s the full law if you have never read it. It doesn’t usurp the Wire Act. It doesn’t usurp state laws. In reality, it means most of the onus of legality here falls on the states, and that’s where it all becomes shades of gray.

Even though this was not written about fantasy vs. the house, I am really fond of this sentence explaining UIGEA via LinkedIn:

UIGEA is a payment statute and the reddest of herrings in the context of whether any contest is legal or illegal in any jurisdiction.

Where fantasy vs. the house operates

Before we get into what states say (or don’t say) about fantasy sports, let’s talk about where they operate.

I may update this post at a later date by detailing where operators serve, but for now, I am just going to provide a spectrum. There are basically two approaches: 1. operate in states using both game of skill laws and DFS laws and 2. Operating in “game of skill” states while avoiding most DFS regulation. If there is an operator that is looking only to serve the DFS law states, I haven’t come across it.

One of the better examples of No. 1 is PrizePicks, which operates in 30 states*, including some (but not all) states with DFS laws. Here’s the map PrizePicks offers on its site:

*PrizePicks recently pulled out of Michigan, which is still shown below, and its maps is constantly in flux these days.

The other approach is to avoid some of the states where DFS has been regulated. No fancy map here, but Betr offers its fantasy vs. the house game in 24 states. Of those, only a few have DFS laws and none have any kind of serious regulation of the industry.

There are upwards of 20 companies in the fantasy vs. the house industry that generally follow one of these two models.

The map for fantasy vs. the house

I’ll give you the map, and then break down what I see as five basic categories, with some state-level detail on occasion:

Operating using a game of skill law, with no DFS law (17)

This is by far the largest group of the bunch. I am not going to get into breaking down what the “game of skill” law says in each of these states, just that it’s the legal basis for offering fantasy vs. the house (and traditional DFS) in this group.

The amount of skill or chance that it takes to satisfy a game of skill law varies by state. It’s at least feasible that fantasy vs. the house does fit game of skill laws in some or all of these states, but it’s far from a guarantee that it does.

Of course, all these states also have laws or compacts that legalize certain types of gambling while generally prohibiting other forms of gambling, including sports betting in both cases.

Alaska
California
Illinois
Georgia
Kentucky
Minnesota
New Mexico
Nebraska
North Dakota
Oklahoma
Oregon
Rhode Island
South Carolina
South Dakota
Texas
Utah
Wisconsin

Some notes:

This group is notable for containing the two biggest states in the union, California and Texas.
Utah also stands out as a state that frowns on all forms of gambling.
Oregon is a strange one; DraftKings agreed with the state to stop operating DFS there in order to be the state’s monopoly sportsbook operator. Most DFS apps still serve the state.

There’s also a very large asterisk, potentially, next to California. The attorney general has been asked to look into the legality of paid-entry fantasy sports (not just parlays vs. the house). Interestingly, a similar 2015 effort amounted to nothing.

However, things have changed quite a bit since then, including:

The fall of the federal ban on sports betting.
A failed 2022 effort to legalize sports betting in California via referendum.
The introduction of fantasy sports platforms that look at a lot more like sports betting.

For the record, it’s far from settled law whether traditional DFS is 100% legal under state law in this group, but its risk profile at this point is much lower in most of these states.

States that fantasy vs. the house operators generally don’t serve but have a DFS law (11)

This is a fascinating group. Some of the basis of the legality of fantasy vs. the house has been optics: “Look at all the states that have legalized fantasy sports!” some say.

The truth is there are just about as many states with DFS laws where fantasy vs. the house doesn’t operate as where it does. That is a fact that is glossed over almost universally in discussions of the industry.

With one exception, DraftKings and FanDuel operate in all of these states, while fantasy vs. the house does not. We don’t have a ton of great public information on why this is in each of these states, but given the scale of the largest of the parlay companies, they would serve the state if it were at all feasible without raising the ire of state regulators and/or attorneys general.

While some of the battles over the legality of fantasy vs. the house have been pretty public, that hasn’t always been the case.

Connecticut: This is a bit of an outlier, in that you have to work with one of the state’s tribes to offer DFS as online gambling. I believe only DraftKings operates here as things stand.
Delaware
Iowa
Louisiana: The state legalized DFS in most of its parishes, with traditional DFS operators going live there in 2021. But I don’t believe any fantasy vs. the house operators are live here.
Maryland: MD was ahead of the curve in saying that fantasy vs. the house shouldn't be taking place in the state unless it was licensed as sports betting.
New Jersey
Ohio: State regulators have been aggressive earlier this year about saying fantasy vs. the house is not legal under state law.
Pennsylvania
New Hampshire
Tennessee
West Virginia: The state only excluded fantasy sports from its sports wagering law, but again, the parlay operators do not serve the state.

You could argue that some of these states belong in the category of “legality is in question.” I’ve included the states above because almost no fantasy vs. the house operators currently serve them.

It’s also worth noting that Underdog operates its other fantasy contests in some of these states.

Operating under a daily fantasy sports law (5)

These are the states with fantasy sports laws and/or regulations on the books where parlay apps largely do operate.

Short of actions by the state’s gaming regulator or attorney general, this group of states is fairly solid ground for a parlay operator… unless they decide to revisit the issue.

It’s important to note even in this small group of states, the amount of attention paid to DFS can range from laissez-faire to more rigorous regulation.

Alabama: While parlays are legal here, some operators have changed their games after consulting with the state’s attorney general.
Indiana
North Carolina: DFS became legal alongside sports betting last year, but DFS vs. the house seems to be on shaky ground. State regulators proposed a ban on parlay-style DFS, then delayed the implementation of the regulation. Underdog recently stopped serving the state with fantasy parlays alongside its effort to offer a sportsbook in the state.
Vermont
Virginia: While the state’s attorney said vs. the house should be treated like sports betting, no action has been taken.

States where fantasy vs. the house legality is in question (11)

This list includes a lot of the recent activity with regulators stepping into say fantasy vs. the house is gambling or at least should not be taking place under DFS law. Many operators still serve these states depending on their risk tolerance. The one exception is Michigan, where most major operators seem to have departed after recent events:

Arkansas: The state recently issued cease and desist letters to fantasy parlay operators.
Arizona: Arizona regulators sent guidance letters about parlay DFS.
Colorado: An altered form of fantasy vs. the house originally was meant to appease regulators, but now there’s a chance that the games are banned entirely.
Florida: Amid the relaunch of online sports betting in the state, the gaming regulator sent cease and desist letters to a few of the largest parlay operators. This effort could also impact traditional DFS. Legislation that would legalize DFS was once again introduced, but similar bills have failed to gain traction several times.
Kansas: The state issued cease-and-desist letters in 2023, but some operators still serve the state. The state has both a sports betting law and a daily fantasy law that includes no taxes or regulation.
Maine: While many operators already avoided the state, the status of fantasy vs the house became even more negative with action taken against Underdog.
Massachusetts: The attorney general’s office sent cease-and-desist letters to fantasy parlay operators in February.
Michigan: Regulators said that parlay DFS that “mimics” sports betting needed to stop in the state, and most of the largest operators seem to have pulled out.
Mississippi: Like Arizona, the regulator sent a letter to some parlay operators. Underdog recently decided to stop serving the state with parlays.
New York: Regulators instituted a new rule saying that fantasy vs. the house should not take place in the state, as it mimics sports betting. Some operators still serve the state, but PrizePicks exited in Februrary 2024 and also paid a $15 million settlement for operating without a license.
Wyoming: The state has said it sent cease and desist letters to parlay vs. the house operators.

It’s worth noting that in all of these states, there is regulated sports betting where you can offer the exact same games/bets as a sportsbook.

States where fantasy vs. the house operators generally don’t operate (6)

The smallest group is where the law is so negative on fantasy vs. the house that operators avoid them:

Hawaii
Idaho
Missouri
Montana
Nevada
Washington

The legality of fantasy vs. the house is far from black and white

With a few exceptions, the industry exists in some shade of gray. The total population of the states where you can argue fantasy vs. the house is explicitly legal: 44 million. Where its status is being called into question: 70 million.

The rest of the county consists of states where fantasy vs. the house is not offered or is explicitly not allowed, or it’s offered as a game of skill with no specific enabling regulations or laws.

While the fantasy vs. the house industry can argue with some clarity that it enjoys UIGEA protection for payment processing under federal law, its status beyond that is far from written in stone in the vast majority of the country.

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