GPWA Times Magazine - Issue 8 - April 2009

GPWA Times | “The Unlawful Internet Gam- bling Enforcement Act did not legalize fantasy sports but did create an exemption from federal prosecu- tion if fantasy sports operators followed the statutory requirements.” LIVING IN A FANTASY A closer look at the UIGEA’s curious exemption for fantasy sports Living in a Fantasy 70 By Joseph M. Kelly I n October 2006, the Unlawful In- ternet Gambling Enforcement Act was suddenly enacted into law when it was attached to unrelated legislation. While it is uncertain what new offenses, if any, were created by the statute, there are two major exemptions from liability: interstate interactive horse-race wagering and fantasy sports. While the interstate horse race exemption did create contro- versy, there was minimal interest in the fantasy sports exemption. An exception to the lack of interest in the exemption would be the Traditional Val- ues Coalition’s Rev. Louis P. Sheldon, who wrote on April 5, 2006 that a pro- posed Internet gambling prohibition act would actually expand gambling by allowing interstate horseracing “and on-line wagers on fantasy sports teams.” Sheldon maintained that in “the past, the National Football League has had two very different interests in this legisla- tion: one, to protect the integrity of professional football by prohib- iting online betting on NFL games, and, two, to line their pockets with royalties by preserving the legality of wagers involved in the growing fan- tasy sports industry. The NFL succeeds in protecting both in- terests in the Goodlatte legislation, which expressly exempts from illegality on-line wagers on fantasy sports teams. . . . It is disingenuous for the National Football League to present their position as anti- gambling when in fact they support carve outs for Fantasy Sports gambling as well as other forms of gambling.” Interestingly, an earlier unsuccessful Internet gambling bill, The Internet Gambling Prohibition Act of 1997, was opposed by the Major League Baseball Players Association because the bill had no exemption for fantasy sports. Perhaps the attitude toward the fantasy sports exception by Congress may be best explained by a spokesperson for Rep. Bob Goodlatte (R-Va.), one of the most ex- treme anti-Internet gambling advocates, who stated in an interviewwith a reporter, “The way this bill was approached was to look at internet gam- bling as g a m b l i n g defined as games o f chance. C o n - gressman Good l a t t e viewed fan- tasy football as more skill-based than a game of chance.” The reporter then concluded, “In fact, none of the bill’s sponsors in the House or Senate would say how the ex- emption for fantasy football ended up in the Unlawful Internet Gambling Act.” The Unlawful Internet Gambling Enforc ement Act did not legalize fantasy sports but did create an exemption from fed- eral prosecution if fantasy sports opera- tors followed the statutory requirements. The legislative history of a prior Internet gambling prohibition bill suggests that Congress wanted to leave the regulation of fantasy sports to the states. For ex- ample, a Congres- sional report in 1999 made it clear that “Section 1085 does not make a Fantasy Sports league game or contest illegal in all States simply because it is ille- gal in one State. Conversely, sec- tion 1085 does not make a game or contest legal in all States simply because it is legal in one State.” So the question remains: Is fantasy sports gambling or wagering? Gambling traditionally involves prize, consideration, and chance. If a player does not pay money to enter a fan- tasy sports league or contest, there is no consideration. The Fantasy Sports Trade Association, which represents about 120 to 150 of the industry’s companies, sug- gests in its online “How to Play Fantasy Baseball” that real money not be utilized, and instead allot each player $260 in start-up play money. Much has been written concerning the lack of negative effects from fantasy sports: there is no increase in bankrupt- cies, crime, or negative impact on “the moral fiber of society” compared with other gambling. Most fantasy sports op-