Stop Saying UIGEA Makes Real-Money Fantasy Sports Legal

I was tempted to send that headline and nothing else this morning, but that’s pretty lazy. I will write some words to accompany the headline.

As we continue to find out we learned very little from daily fantasy sports 1.0, I am struck that there is still a fundamental misunderstanding about the law that we credit for giving rise to paid-entry fantasy sports in the first place.

The starting point for the legality of FanDuel and DraftKings contests in the early 2010s, and for the fantasy sports vs. the house industry now, has always been the federal Unlawful Internet Gambling Enforcement Act of 2006.

This post is not a legal or academic treatise. Plenty of very smart people have written about UIGEA more granularly than I have. I just want to make a couple of points:

• The UIGEA doesn’t legalize anything, including fantasy sports.

• The UIGEA is a law about payment processing.

Nothing in UIGEA makes paid-entry fantasy sports contests inherently legal beyond their intersection with processing payments under federal law. The law leaves states to determine what is legal and what is not when it comes to fantasy sports and if they venture into the realm of gambling. And it’s very possible and sometimes very clear that DFS can be considered “not gambling” under many state laws; I am just not sure how many of those states have really contemplated that issue.

But that’s not the topic of this post. What I want is for people to stop waving “UIGEA MAKES FANTASY SPORTS LEGAL” in our faces as if it has an ounce of truth to it. UIGEA is not a bag of magic beans that lets you do whatever you want as long as you call it “fantasy sports.”

Here’s a rundown, in chronological order, of what companies have used UIGEA to justify in real-money fantasy sports:

1. Season-long fantasy sports (peer-to-peer)

2. Daily fantasy sports contests based on multiple games (peer-to-peer)

3. Single-game fantasy sports (peer-to-peer; this started around 2018)

4. Predictions of two or more player performances based on how many fantasy points they score. (user vs. the house; this is the start of DFS 2.0/fantasy sports parlays)

5. Predictions of two or more player performances for an entire game based on any statistics (user vs. the house; ie predicting two players will score a touchdown).

6. Predictions of two or more player performances while games are being played or for just part of a game (user vs. the house; here is a visual for this and what captures the dynamic in No. 5 as well.)

It’s kind of crazy to write that evolution down, because we started having questions about the legality of DFS vs. UIGEA at step 2. And then the envelope continued to be pushed in ensuing years.

Circa 2015, DraftKings CEO Jason Robins was very much aware that his company was already pushing it with UIGEA when it came to offering contests based on NASCAR races and golf tournaments. And here’s FanDuel CEO Nigel Eccles even before that:

“The legal status is very negative. NASCAR doesn’t provide a lot of stats that you could construct a fantasy game around, and so any game quickly resembles sports betting. Unless that changes I can’t see us offering fantasy NASCAR.”

And all that was five steps ago in the iteration of what fantasy companies are using UIGEA to justify today!

Anyway, the takeaway is this: The narrative that the UIGEA lets you offer any kind of real-money fantasy sports, as long as you precisely follow its language, is baloney. I kindly ask you to stop implying that it does.

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