FanDuel Compromises with Attorney General, while DraftKings Prepares for Legal Action

In Texas, FanDuel Compromises with Attorney General, while DraftKings Prepares for Legal Action

The two largest Daily Fantasy Sports operators in the United States, FanDuel and DraftKings, are adopting radically divergent directions in their respective response to opposition from the Texas government. FanDuel’s stance is ameliorative; DraftKings is being openly, and loudly, combative.

In January, Texas Attorney General Ken Paxton’s office made a statement interpreting Daily Fantasy Sports as “prohibited gambling” under the state’s constitution. “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,” he said.

Unlike other states, Paxton had the ability to cite Texas-specific wording that contests that are won “solely or partially by chance” diverge from “bona fide contest[s] for the determination of skill.” Even the presence of “partial chance” qualifies a game as gambling in Texas. This wording is not necessarily present in other states’ laws, which often require skill to be only a “dominant factor.”

Paxton and FanDuel have reached an agreement that will take effect on May 2 of this year. FanDuel will be restricting Texans’ access to any and all contests that involve money of any kind, be it entry fees or prizes. In return, Paxton has promised “not to take any legal action” against FanDuel for its operations prior to his ruling. FanDuel will continue to offer its free games to Texans.

“This will spare both the company and the taxpayers of Texas the expense of an extensive lawsuit that I believe would only affirm what my office has already determined,” Paxton said in a statement to the media.
Still, FanDuel is estimated to lose up to 8% of its overall US player count from such a withdrawal.

DraftKings, however, welcomes legal action and has lawyered up accordingly. Randy Mastro, a lawyer employed by DraftKings, gave a statement on March 4: "We look forward to presenting evidence to demonstrate that Daily Fantasy Sports are skill-based games and perfectly legal under Texas law, certainly no less so than other kinds of skill-based contests. We are committed to ensuring that our fans can continue to enjoy the contests they love.”

Mastro is also the lawyer representing DraftKings in its high profile showdown with New York Attorney General Eric Schneiderman, with whom the Daily Fantasy Sports giant has been in court since November of last year.