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What Is The True Legal Status Of Daily Fantasy Sports?

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There is no doubt the "daily fantasy sports" marketplace is booming in America, with companies as varied as Comcast , MGT Capital and even the National Basketball Association becoming investors.   Yet, one of the longstanding challenges for the "daily fantasy sports" industry has been the perception of legal risk -- a perception that keeps companies such as Yahoo , CBS and  ESPN  on the outside of this profitable marketplace.

Recently, several newspaper articles have suggested that the risks associated with "daily fantasy sports" have largely disappeared.  Notably, a Friday article in the Washington Post quotes one lawyer proclaiming that "daily fantasy sports" is "entirely legal" without any caveat.  Meanwhile, a column from last week's Des Moines Register that was written by two state politicians presumes fantasy sports is totally legal in 45 states.

Nevertheless, such statements seem to be more based on aspiration than reality.

Although it is true that there have not been any criminal challenges to date to "daily fantasy sport," there is absolutely no blanket immunity for "daily fantasy sports" under either federal or state law.  Rather, the legal status of “daily fantasy sports” seems to vary based on the nature of each contest’s game rules and states of operation.  

Furthermore, when assessing the legality of a "daily fantasy sports," there seem to be more than just five states with bona fide legal risk.  While the Fantasy Sports Trade Association widely acknowledges legal risks in Arizona, Iowa, Louisiana, Montana and Washington, the law in states such as Arkansas and Tennessee seem to similarly indicate elevated risks.

A thorough and objective review of the legal issues pertaining to "daily fantasy sports" can be found in my upcoming University of Illinois Law Review article, "Navigating the Legal Risks of Daily Fantasy Sports." In addition, meaningful details about the legal issues in "daily fantasy sports" will likely emerge from a series of other law review articles that are expected to be published later this year.

Nowadays, there is no doubt the "daily fantasy sports" marketplace has very high upside.  But new investors (especially those who enter the market with newer and riskier format games) need to understand that there are still some important hurdles for "daily fantasy sports" companies to overcome.

The legal risks are certainly worth discussing.  They are not topics that industry leaders or reporters should simply brush aside.

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Marc Edelman is an Associate Professor of Law at the City University of New York’s Baruch College, Zicklin School of Business, where he published “A Short Treatise on Fantasy Sports and the Law” and has recently released "Navigating the Legal Risks of Daily Fantasy Sports."  He also is a fantasy sports attorney and legal consultant for a wide range of sports and gaming companies.  Nothing contained in this article should be construed as legal advice. Follow him on twitter @MarcEdelman