Legal Risk (daily fantasy sports edition)

As we mentioned in our previous post, Eric Schneiderman, the Attorney General of New York, recently sent a “cease-and-desist” letter to DraftKings and FanDuel, ordering them to stop taking wagers from New York residents. Both firms have responded that they will fight this action in court, but will they win? Our friend and colleague, law professor Marc Edelman, has written up a comprehensive survey of the major legal risks in the Daily Fantasy Sports industry. (Check out some of his research in the area of sports law here.) In brief, state courts in New York have used a “material element” test to determine whether a particular contest is an illegal game of chance. This test, however, confers a high degree of discretion to the courts. In the words of Prof. Edelman, “it is possible for a court to find a contest is not determined by skill even if one can prove mathematically that the contest is 51% or more skill.” (See Edelman, in press, p. 24, footnote omitted.) So, how will this legal battle play out? Your guess is as good as ours …

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