Texas Attorney General declares fantasy sports sites illegal gambling

In this Wednesday, Sept. 9, 2015, photo, Devlin D'Zmura, a tending news manager at DraftKings, a daily fantasy sports company, works on his laptop at the company's offices in Boston. The daily fantasy sports industry is eyeing a breakout season as NFL games begin. And its two dominant companies, DraftKings and FanDuel, are touting lucrative opening week prizes to try to draw more customers as more competitors pop up. (AP Photo/Stephan Savoia)

AUSTIN (KXAN) — Texas Attorney General Ken Paxton has decided that fantasy sports betting sites like FanDuel and Draftkings are illegal in the state.

In Texas, it’s illegal to place a bet on a player or a game, but there is an exception: if the bet is made in a private place.

Paxton’s decision now clarifies that bets made online are not a private affair.

“It’s my duty as Attorney General to look to the law, as passed by the people’s representatives, to answer the questions put to this office,” Attorney General Ken Paxton said in a statement. “Paid daily ‘fantasy sports’ operators claim they can legally operate as an unregulated house, but none of their arguments square with existing Texas law. Simply put, it is prohibited gambling in Texas if you bet on the performance of a participant in a sporting event and the house takes a cut.”

The opinion makes clear that traditional fantasy sports leagues are, as a general rule, legal under Texas law. In those leagues, participants generally split any pot between themselves, so there is no house that takes a cut.

As the daily sports website have gotten more popular, states across the country have been trying to get a handle on the new business model. In Nevada, companies such as FantasyHub have to get gambling licenses. In November, New York ordered FanDuel and DraftKings to cease and desist, saying it’s illegal gambling. Last session, lawmakers in Texas discussed banning the operation of daily fantasy sports websites altogether.

“If Attorney General Paxton is truly concerned about the small businesses that operate in Texas and the million of people in Texas who enjoy fantasy sports, he would stop grandstanding and start working with the FSTA and the Texas Legislature on common sense consumer protection issues like those being proposed in Massachusetts, Florida, Inidana, Illinois, California, and other forward-looking states,” said the chairman of the Fantasy Sports Trade Associated, Peter Schoenke, in a statement responding to Paxton. “Paxton’s deliberate misinterpretation of existing Texas law represents the type of government overreach that he himself professes to reject. The FSTA vehemently opposes today’s opinion.”

So how does this impact you? It’s already laid out in Texas law. If you play daily fantasy sports you commit a class C misdemeanor. That’s like a speeding ticket.  If you operate or promote daily fantasy sports, it’s a class A misdemeanor. Punishment could be a year in jail and a $4,000 fine.  These cases are handled by county attorneys. So far, Travis county has never prosecuted someone for daily fantasy sports. That could change.

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