Hawaii’s attorney general became the latest regulator to declare daily fantasy sports contests are illegal gambling under state law, saying he may follow up with “civil or criminal enforcement” actions against the fast-growing industry.
Hawaii Attorney General Doug Chin said many casual fantasy sports games would be considered permissible “social gambling” under Hawaii law.
But in a legal opinion issued Wednesday, Chin said daily fantasy games with cash prizes, popularized by Boston’s DraftKings Inc. and New York-based FanDuel Inc., were a different breed of fantasy sports.
Those games violate the state’s ban on contests that involve risking something of value “upon any future contingent event not under the person’s control,” he said.
“The technology may have changed, but the vice has not,” Chin said in a news release.
DraftKings and FanDuel both disagreed with Chin’s opinion, saying their games should be considered legal contests because of the skill that participants have to exercise in choosing promising fantasy lineups.
The law could change: Hawaii legislators have already introduced several bills that would regulate daily fantasy sports by requiring the operators to register with state authorities. A separate bill, meanwhile, would make promoting those contests explicitly illegal.
“We intend to continue our constructive work with lawmakers in the state, and across the nation, to see to it that fans are able to continue to enjoy the fantasy sports contests they love,” DraftKings lawyer Randy Mastro said.
Chin’s action adds Hawaii to a growing list of states that questioned the legality of daily fantasy sports played for cash prizes. Attorneys general in Texas, Illinois, and Vermont have recently said that the games violate state gambling law.
The most serious challenge has come from New York’s attorney general, who is asking a judge to shut DraftKings and FanDuel down in that state. Nevada regulators effectively forced the industry to flee that state last year after ruling that fantasy sports operators needed to secure gambling licenses.
Massachusetts regulators have said state law is unclear on the subject and have instead proposed increased regulation of the industry. Attorney General Maura
Healey is finalizing a long list of consumer protection measures, including a ban on players under 21 and elimination of fantasy contests based on college sports.
In fantasy sports, contestants assemble fictional rosters of real-life athletes and amass points based on those players’ on-field statistics. Prizes can top $1 million.
Analysts expected players to spend about $3 billion on the contests in 2015, more than triple the amount spent the year before. But the flurry of legal problems has also slowed the industry’s growth. The companies are not profitable.
In many states, determining whether fantasy sports are legal hinges on questions of skill and chance. The companies argue their games are mostly governed by a player’s skill in assembling rosters, not by the random twists of the actual sports contests.
Fantasy sports industry officials have said that bills regulating fantasy sports are being weighed in more than two dozen states.
California lawmakers took a major step toward allowing the games on Wednesday when the state Assembly overwhelmingly passed a regulatory bill that would require company officials to pass background checks, pay taxes on their profits, and report player winnings to the state for taxation, among other measures.
The bill now moves to California’s state Senate for consideration.