Ed O'Bannon's victory against the NCAA upheld by Ninth Circuit

Here's my take for Sports Illustrated on Ed O'Bannon winning the appeal in the Ninth Circuit, which (in the NCAA's favor) also eliminated the proposed $5,000 per year payment to student-athletes.

Funded Opportunity for PhD Student in "Sports Law Analytics"

Starting Fall 2016, I will be be able to sponsor 1-2 new PhD students here at Florida State University (”FSU”).  New students studying under my supervision may be funded for at least three years (assuming reasonable progress each year and compliance with university guidelines).  Such funding usually includes a teaching appointment (undergraduate sports law course), a research/living stipend, a teaching/research assistant position, and tuition remission.

PhD programs in this field usually take 3-5 years.  As such, it is a considerable investment in time and may carry with it significant opportunity costs.

The phrase “sports law analytics” is in quotes for a reason…there is no doctoral degree (that I am aware of) in such a topic.  In my mind, “sports law analytics” is the application of parsimonious quantitative methods to legal issues in the sports industry.  The actual degree program here at FSU would result in a PhD in “sport management.”  However, like I did several years ago when I was a doctoral student at Indiana University, a PhD student studying under my supervision would take coursework that lends itself to being able to take a quantitative look at legal issues in sports.  Learning how to conduct archival research would be key too.  Graduates would be capable of publishing research in peer reviewed academic journals and law reviews.  Papers included in my Google Scholar profile are illustrative.

The ideal candidate would fall under one or both of the following categories: (i) someone who is a graduate of an ABA-approved law school with a documented interest in sports law and some degree of statistical acumen/interest and/or (ii) someone who holds an undergraduate or graduate degree in economics or statistics and can demonstrate an interest in sports law issues.

All candidates must be proficient in either Bluebook or APA.  Experience with Stata and/or Excel is desirable.

The foregoing is not meant to be an exhaustive explanation of the PhD program or its component parts.  If you are interested, please contact me for further details.  I am happy to discuss on the phone or in-person. 

Second Circuit grants NFL motion for expedited appeal in Tom Brady v. NFL

The U.S. Court of Appeals for the Second Circuit tonight granted the NFL's motion for an expedited review of Tom Brady v. NFL. Here are my five key points for Sports Illustrated on what this development means for Brady, the NFL and the New England Patriots.

From Meerkat to Periscope: Does Intellectual Property Law Prohibit the Live Streaming of Commercial Sporting Events

On May 2, 2015, American boxing fans tuned into Meerkat and Periscope to watch free live streaming of the Mayweather-Pacquiao championship fight, produced by other sports fans. This phenomena has caused grave concern among some sports entities and their television broadcast partners. If legal, will live streaming eat into the size of their future television audiences?

In a new Columbia Journal of Arts & the Law article (forthcoming Spring of 2016), I discuss the potential impact of live streaming on the commercial sports industry.  I also analyze whether commercial sports enterprises have the legal power to stop live streaming of professional and collegiate sporting events.

Among other things, this article discusses how the NCAA's argument that the First Amendment trumps college athletes' publicity rights in the televised use of their likenesses might actually increase the likelihood that fans in attendance at a sporting event may legally live stream the entire event.

The current version of my upcoming law review article is available for download here.  Thoughts and suggestions are always appreciated.

Cheerleader Minimum-Wage Litigation Comes to the NBA

The professional sports industry has been hit with a number of minimum wage lawsuits in recent years. These cases have predominantly focused on the allegedly unlawful pay practices of teams in the NFL and MLB, with various categories of team employees filing suit against their employers for allegedly failing to comply with the minimum wage and overtime requirements of the Fair Labor Standards Act ("FLSA").

For example, in the last two years alone seven different lawsuits have been filed against the NFL and its teams by former cheerleaders who allege that they were paid much less than the federally guaranteed $7.25 minimum wage. Given the high-profile nature of these cheerleader lawsuits, some had speculated that similar litigation could soon be filed against teams in the NBA or NHL as well.

As predicted, just such a case was filed on Thursday, when a former cheerleader for the NBA's Milwaukee Bucks filed a lawsuit alleging that the team failed to pay her in accordance with federal and state minimum wage laws. In Herington v. Milwaukee Bucks, LLC, former Bucks cheerleader Lauren Herington contends that the team required its cheerleaders to spend upwards of 30 hours per week in mandatory practice and workout sessions, in addition to their game-day duties. Because these workout sessions (as well as mandatory salon visits) were unpaid, the complaint asserts that the Bucks not only failed to pay their cheerleaders the minimum wage, but often neglected to pay them overtime as well.

As was the case in the NFL and MLB minimum wage lawsuits, the Bucks are likely to assert in defense that the team is exempt from at least the federal minimum wage and overtime requirements under 29 U.S.C. § 213(a)(3), a statutory provision covering seasonal amusement and recreational establishments.  As I explained last year, under this exception any amusement or recreational establishment may pay its employees a sub-minimum wage (without overtime) so long as one of the following two conditions exist: either (A) the establishment does not operate for more than seven months in any calendar year, or (B) the establishment's revenue in its six lowest revenue months in the previous year was no more than 33 1/3% of its revenue received in its six highest revenue months (e.g., the business's receipts from April-September were at least three times greater than its receipts from October-March).

Because the Bucks were eliminated in the first round of the NBA playoffs this past spring, the team's entire 2014-15 pre-season, regular season, and post-season only cumulatively spanned seven months (from October through April). So the team is likely to argue that this qualifies it as a seasonal establishment under Section 213(a)(3)(A), and therefore that the team is not required to pay its cheerleaders in accordance with the FLSA.

As I noted last year, prior courts are split on the question of whether professional sports teams qualify for FLSA immunity under Section 213(a)(3), based on whether judges view a sports franchise's amusement-related operations as lasting only during the team's playing season or as running year round. However, as my co-author Charlotte Alexander and I conclude in our forthcoming U.C. Davis Law Review article "Gaming the System: The Exemption of Professional Sports Teams from the Fair Labor Standards Act," NBA teams can credibly contend that they qualify for the Section 213(a)(3) exemption in at least some portions of their operations given the existing statutory language and accompanying regulations. 

Nevertheless, despite this potential defense, it would not be surprising if the Bucks ultimately opt to settle the Herington suit. Indeed, several NFL teams confronting cheerleader lawsuits have elected to settle the claims even though they arguably have an even stronger argument for exempt status under Section 213(a)(3) given the shorter length of their playing season. Most notably, the Oakland Raiders agreed to pay its former cheerleaders $1.25 million to settle their minimum wage claims even though the U.S. Department of Labor had issued an opinion earlier that same year concluding that the team was not subject to the FLSA due to Section 213(a)(3).

At the same time, it also would not be surprising if the Herington suit motivates other NBA cheerleaders to file suit against their teams. In the NFL's case, five additional teams quickly faced their own cheerleader lawsuits within the span of just a few short months after the league's first case was filed. The NBA must now hope that its teams do not face a similar wave of cheerleader minimum-wage litigation.

At a minimum, though, the Herington lawsuit shows that the allegedly unlawful pay practices of professional sports teams will continue to remain a pressing issue for the sports industry for the foreseeable future.

John Molori column in Patriots Football Weekly: "McCann brings common sense to emotional NFL issues"

My sincere thanks to John Molori of Patriots Football Weekly for writing a wonderful column titled "McCann Brings Common Sense to Emotional NFL Issues" in the latest issue (Sept. 20, 2015) of the magazine. I am posting the column with permission:

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BUSINESS BLITZ

By John Molori

McCann brings common sense to emotional NFL issues

     Sports Illustrated legal analyst and writer Michael McCann is a wanted man. With the NFL awash in labor and legal issues on a seemingly daily basis, the founding Director of the Sports and Entertainment Law Institute at the University of New Hampshire School of Law has been beset by media inquiries.


     Give McCann’s mobile phone a jingle and you might hear a message saying that he is taking a break from media requests. When you try to leave a message, his mailbox is full. Why, you ask? It’s simple. McCann’s writing, teaching, analysis, and commentary has provided a sane and sublime look at the NFL’s off-field woes, eschewing emotional hyperbole and focusing on common sense and facts.

     The 39-year old McCann was ahead of the curve on the seemingly eternal Deflategate issue, stating early on that the NFL did not have enough evidence against Tom Brady to uphold his 4-game suspension. In fact, McCann has devoted an entire class to Deflategate at UNH.

     When ESPN’s expansive Spygate revelations came to light on September 8, many reacted with rage and doubt. Was ESPN using the story as payback for the backlash they took for their shoddy Deflategate reporting? Did they coordinate the story’s release to negatively affect the Patriots’ opening night festivities? Typically, McCann embraces no such conspiracy theories.

     He relates, “I’m not sure we can say that anything was coordinated. My take is that there was a lot of time spent on that story, a lot of work. I think ESPN just wanted to get it out before anyone else did.”

     Conventional wisdom, or should I say, New England conventional wisdom, says that Commissioner Roger Goodell’s harsh punishment against the Patriots and Brady for Deflategate was a “make up call” for his perceived slap on the wrist for Spygate in 2007. 

     Ever the realist, McCann opines, “I’m not sure it was a makeup call. Certainly, there are other owners who feel some frustration toward the Patriots. It could be plausible that they wanted Goodell to treat the Patriots more harshly this time. It gives a narrative to the story, but there is not a lot of evidence that this happened.”

     Evidence. There’s that word again. It is the key reason why the NFL’s reactions based on Ted Wells’ infamous Deflategate report were ultimately flawed. McCann saw through the report, but still has some sympathy for Wells, who was thrust into a difficult situation.  “The NFL made a big mistake describing the report as independent,” says McCann, who has covered the Aaron Hernandez murder case, Boston Marathon bombings, and Penn State and Lance Armstrong scandals, among other stories.

     “It was not independent. This whole thing really did a disservice to Ted Wells. It does absolutely nothing for Wells in his career. He may have made a lot of money from the league, but I am not sure he would ever want to work for the NFL in the future.”

     Putting legalities, rules, and points of law aside, the Deflategate issue hit at the heart of a powerful NFL relationship – the one between Roger Goodell and Patriots owner Robert Kraft. “Robert Kraft really feels like his franchise has been treated poorly and has suffered reputational harm,” says McCann.

     “These stories are damaging to a franchise. I do think that Kraft did not fight the Commissioner’s punishment hoping that Brady would get a reduction in his suspension. Goodell’s contract is up in 2019, and most likely, Robert Kraft will still be an active owner then. It would not surprise me if the NFL possibly replaces Goodell at that time.”

     McCann’s legal and academic resume is impressive. A graduate of Harvard Law School, the University of Virginia School of Law and Georgetown University, he taught the first-ever sports law analytics class at Yale Law School. He also co-founded the Project on Law & Mind Sciences at Harvard Law School and is the Distinguished Visiting Hall of Fame Professor of Law at Mississippi College School of Law.

     Beyond the credentials, McCann’s greatest strength is his ability to apply his vast knowledge beyond the ivy-covered walls of academia to the current player conduct crisis in the NFL.

     “The crisis is about disciplinary problems.” asserts the Andover, MA native and resident. “From the New Orleans Saints’ bounty issue, to Ray Rice, Adrian Peterson, and Tom Brady. It makes sense for the NFL to reform.”

     Part of this reform could include a proposed change in Roger Goodell’s areas of purview. Goodell, himself, says that he would be open to such a change. Says McCann, “The Commissioner is not an attorney and this affects how he views issues of process and fairness. Yes, he is empowered by the owners, but the Players’ Association gave him the power with personal conduct issues.

     “In the NBA, if a player is suspended for more than 12 games, he has the right to have his case heard by an independent arbitrator. If NBA Commissioner Adam Silver had the authority that Goodell has, I think the results would be different because he has a legal background.”

     Despite the tidal wave of criticism. Goodell continues to ride the crest of NFL prosperity, i.e. - he continues to make wads of money for NFL owners. McCann explains, “Credit and blame flow upward. That crisis that we discussed does not affect the NFL’s bottom line.

     “These off-field disciplinary issues are negative, but in a kind of perverse way, they have actually added to the league’s popularity. Think of all the people who were not interested in the NFL, but have become interested recently because of these stories.”

     Speaking of stories, McCann has filed more than 400 of them for Sports Illustrated and SI.com. He has been featured on numerous multi-media outlets, most recently Fox Sports 1, Monday Night Football, and MSNBC.

     So, what draws this journalistic lawyer and lawyerly journalist to a subject? “I like stories that are teachable and that comport to the classroom,” he relates. “Sports law involves some very serious areas of law.”

    There are many who believe that the legal and moral issues in the NFL merely reflect those of society as a whole. McCann, who served as counsel to college football star Maurice Clarett in his NFL eligibility lawsuit, gives his view.

     “I think it is fair to say that pro football mirrors society in some aspects. Tom Brady’s case was about management-union relations, but in life, it is not usually about a worker making $20 million a year. Certainly, the courts treat sports differently. You can fight in a game or on the field and get away with it. If you did that on the street, you would be tried in court.”

      Media attention aside, McCann’s first love is education. He has won the Professor the Year Award for outstanding teaching several times and written more than 20 law review articles, including placements in the Yale Law Journal and Boston College Law Review. He has also presented at MIT Sloan Sports Analytics Conferences since 2009.

     In 2011, the Society for Social Psychology & Personality awarded McCann its Media Prize for excellence in explaining legal topics to a general audience. While McCann is making a name for himself as a much sought-after media personality, he is first and foremost a teacher, and his Sports and Entertainment Law Institute at UNH Law is his most important stage.

     He explains, “The program started a few years ago when I was a visiting professor at UNH Law School. They offered me a tenured position and a chance to direct the program. It is a great program that helps students build the necessary skills to get into the sports industry.

     “People say there are no jobs in sports, but that is not true. Colleges are hiring more lawyers than ever. It is a growth industry. You may not become the attorney for the Patriots or Red Sox right when you graduate, but in our program, you will take the courses that will help you get there in the future. Recent sports stories have also included issues of labor law, evidence, and even murder. As a professor, I can use these stories to inform students about relevant areas of the law.”

John Molori is an author and columnist for numerous publications. Like him on Facebook at John Molori, Twitter @MoloriMedia. Email molorimedia@aol.com.

David Stern: NBA Would Seek "Payment" for Sports Betting Legalization (and Other Interesting Revelations)

It turns out the Adam Silver was not the first NBA Commissioner to raise the prospect of legalized sports betting. Nearly two years before current NBA Commissioner Adam Silver penned the now-famous New York Times Op-Ed calling for the legalization of sports betting via a “federal framework,” his predecessor, David Stern, hinted at the very same thing. In a recently-unsealed deposition from the professional sports leagues' and NCAA's 2012 federal lawsuit to block New Jersey's efforts to legalize sports betting (the "Christie I" case), Mr. Stern elaborated on comments he made to Sports Illustrated columnist Ian Thomsen in a December 11, 2009 interview in which he stated that legal sports betting was a “possibility.”

In response to questioning from Attorney William Wegner (of the Gibson Dunn law firm, which represented New Jersey Governor Christie in the lawsuit), Commissioner Stern made a number revealing comments on why he believed legalized sports betting in the near-future was a “possibility” and “would ultimately be made legal” by the federal government. He pointed specifically to the “funding needs” of government and the changing attitudes about gambling as the main reason why believed PASPA would be "modified" at some point in his lifetime (if not his "professional lifetime"). Here is his full answer:

A:    Because in my sort of view, the coming hunger for money, funding, in order to deal with deficits that our nation faces caused me to believe that within the next decade or two, if not sooner, PASPA would be modified so that the federal government would take over gaming and over our objections likely because the march of funding needs is so great that, you know, they would ultimately be made legal. Not any time soon, certainly not in my – maybe not in my professional lifetime, maybe in my lifetime depending upon how long I was planning to live. . . . We've gone from a culture that didn't allow lotteries to one where I'll bet you a majority of our states have a physical presence that allows some kind of casino gambling, starting out on the Indian reservation going to downtown casinos in Detroit and Cleveland and New York City actually.. So that the broader context of gambling has -- the fact that it's a regressive tax concerning to the people who are supposed to lead us, and they're interested only on the funding side. So it's -- it has been a march. I've been a witness. I've been a witness to it.

Commissioner Stern was also asked about his earlier comment--from the interview that he gave to SI's Ian Thomsen in 2009--that “buried within the threat of legalized gambling there may be a huge opportunity as well.” In his 2012 deposition, Stern elaborated on that prior statement as meaning that whenever nationwide sports betting becomes legal, “it would come with enough money to deal with the apparatus necessary to protect the sports from the threats that are posed.” Presumably, he is referring to the “integrity monitoring” that would likely be at the core of any future legalized sports betting framework. Significantly, Commissioner Stern added that any future legalized framework would necessarily have to involve the leagues as part of the “policing efforts” for which “there would likely be a payment of some kind at that time.” (emphasis mine)

While many have speculated that the four major professional sports leagues (and perhaps the NCAA) would demand a percentage of the wagering activity as part of any future legalized betting framework (in fact, two New Jersey legislators have previously floated this idea), Mr. Stern’s testimony represents the first—and only—time that a commissioner of one of the professional sports leagues has broached the subject of payments being made directly to the sports leagues.

But he did not stop there. Commissioner Stern also candidly admitted that the NBA’s internal rules and policies in place to protect the integrity of the NBA games were “ineffective” in the case of Tim Donaghy, the now-disgraced former NBA referee who allegedly bet on games that he refereed. Stern characterized the league’s detection of Mr. Donaghy’s gambling activities as “accidental,” noting that the league only learned of it as a result of an FBI investigation.

Commissioner Stern also revealed that that the NBA was, by 2012, already working with “gambling monitors” to obtain information that would help the league detect unusual wagering patterns on the league's games. He testified that the NBA “ha[s] a relationship with somebody or some people or some folks and we watch lines and get reports of unusual activity and things like that.” Stern also acknowledged that the Las Vegas sports books have provided the NBA with information about “unusual” betting activity on certain games, which he characterized as “a couple of strange betting events.” While he could not recall any specific instance, Stern did indicate that these games involved “unusual movement” on the betting lines.

While these statements represent only a small slice of Commissioner Stern’s deposition testimony, they nonetheless provide a glimpse into the future sports betting landscape, one which will apparently entail the leagues receiving a cut of the gambling revenues and the installation of an “integrity monitoring” apparatus to detect unusual wagering activity. At the very least, Commissioner Stern’s 2012 testimony (elaborating on statements he made in 2009) reveals that the NBA has been examining the issue of sports betting legalization long before the New Jersey situation developed. Stern’s testimony also surprisingly reveals that Adam Silver was not the first NBA Commissioner to recognize that legal sports betting was "inevitable."

State of Massachusetts Is Investigating DraftKings; What Will They Look At?

On Friday, Daniel Wallach and Justin Fielkow offered an extensive analysis of the Commonwealth of Massachusetts opening an investigation against the daily fantasy sports operator, DraftKings. Over on Forbes, I offer my own analysis and highlight six areas on which this investigation may focus.  These areas include the following: (1) compliance with Massachusetts state gambling law; (2) compliance with federal gambling law (because DraftKings is a Mass. company); (3) whether DraftKings's "100% legal" warranty is misleading; (4) whether DraftKings sufficiently blocks users in states of known illegality; (5) whether DraftKings takes proper precautions to block minors from its website; and (6) whether the DraftKings/Major League Baseball partnership facilitates the fixing of game results and sharing of insider information.

The full Forbes article is available to be viewed here.  For a more detailed discussion of the legality of daily fantasy sports, the following law review resources are also available:

1.  A Short Treatise on Fantasy Sports and the Law (Harvard Journal of Sports & Entertainment Law)

2.  Navigating the Legal Risks of Daily Fantasy Sports (University of Illinois Law Review).

3.  The Legal Status of Fantasy Sports in a Changing Business Environment (Northern Kentucky Law Review).

Massachusetts AG's "Review" of Daily Fantasy Sports May Have National Repercussions

On Thursday, news broke that Massachusetts Attorney General Maura Healey is “reviewing" the legality of so-called “daily” fantasy sports games (“DFS”), such as those offered by industry titans DraftKings and FanDuel. This raises troubling concerns for the DFS industry because of Ms. Healey's well-known opposition to gambling expansion (a hot-button issue in Massachusetts). During her recent campaign (she was elected in 2014), Ms. Healey said that she would be "proactive" in "combat[ing]" the challenges posed by expanded gambling and would hold the gaming industry “accountable.”[1]She also testified before the state’s gaming commission (which she oversees) on her very first day in office, promising to make gambling enforcement “a priority.” Indeed, during her brief time in office, Ms. Healey has followed through on that promise by proposing a number of consumer protection initiatives aimed at the state’s nascent gaming industry: for example, she urged the state’s gambling commissioners to consider capping ATM withdrawals and prohibiting credit card cash advances at Massachusetts casinos. She also tried to block efforts by well-known casino magnate Steve Wynn to build a $1.7 billion casino development in Everett (near Boston) by calling for a delay in the issuance of key environmental permits.

As the commonwealth's top law enforcement officer, Ms. Healey wields considerable authority, thanks to the broad powers Massachusetts law confers upon the Attorney General. For example, the Attorney General can initiate investigations and even bring both civil and criminal lawsuits. In addition, the AG's office oversees the Gaming Enforcement Division, which is charged with investigating and prosecuting violations of Massachusetts gaming law. Alluding to her broad powers, Ms. Healey stated that her office “is committed to using its full civil and criminal authority to ensure that the gaming industry is held to the many financial and legal commitments it has made to our state, host and neighboring communities, and the people of Massachusetts.” Her upcoming "review" of DraftKings' business would certainly be consistent with that statement.

The Possibility of an Advisory Opinion

One option for Ms. Healey would be to issue a "formal opinion" or “legal advisory." Under Massachusetts law, the Attorney General is authorized to render formal opinions and legal advice to constitutional officers, agencies and departments, district attorneys, and branches and committees of the Legislature. During her brief time in office, Ms. Healey has not issued any formal opinions, and her predecessors have rarely exercised that authority (only seven formal opinions have been issued by the Massachusetts Attorney General since 1995, and none of them addressed gambling laws). However, the Attorney General has made much more frequent use of “advisories,” which are less binding than formal opinions but still persuasive (especially in a state with no specific laws governing fantasy sports). Given Ms. Healey's well-known opposition to gambling expansion (one of her key platforms when she ran for office), the prospect of a formal opinion or advisory addressing the legality of daily fantasy sports looms as a strong possibility. And such an opinion, if issued, would carry substantial weight in a commonwealth that does not have any statutes, laws, ordinances, regulations or judicial opinions addressing fantasy sports.

If Ms. Healey were to exercise her statutory authority to issue a formal opinion or advisory as to the legality of daily fantasy sports, it could have significant repercussions nationwide. In almost all states, the essential elements for a contest offered to be considered an illegal “lottery” or “gambling” are (1) prize, (2) consideration, and (3) chance. In most states, real-money DFS contests will usually satisfy the first two elements, prize and consideration, because the contests will require entrants to pay a monetary fee to participate in them and a prize or reward will be awarded to certain participants based upon the outcome of the contests. Yet, what separates gambling from non-gambling activity in many states is an incredibly subjective determination of whether an activity is one of “chance” (likely gambling if the other elements are met) or one of “skill” (not gambling).

Much ado has been made about the express fantasy sports exemption contained in the Unlawful Internet Gaming Enforcement Act (the “UIGEA”), a federal bill that was signed into law in 2006. This exemption, however, does not make every fantasy sports contest for money legal. DFS contests still must comply with each specific state’s particular prohibitions on gambling and private lotteries. Significantly, the UIGEA does not preempt state law: the UIGEA provides in its “Rule of Construction” that “No provision of this subchapter shall be construed as altering, limiting, or extending any Federal or State law or Tribal-State compact prohibiting, permitting, or regulating gambling within the United States.”  31 USC 5361(b). This provision clearly leaves state law unaltered by the passage of the UIGEA, thereby leaving states free to make their own determinations as to the legality of daily fantasy sports. This presents unique challenges to fantasy sports businesses, because the laws, and standards used by courts to decipher these laws, can vary dramatically on a state-by-state basis.

That brings us to Massachusetts. In analyzing whether a DFS contest is one of skill or chance, Massachusetts is one of the majority of states which applies the “predominant factor” test. See Com. v. Lake, 317 Mass. 264, 267 (Mass. 1944) (holding that “a game is … considered a lottery if the element of chance predominates and not a lottery if the element of skill predominates.); see also Com. v. Stewart-Johnson, 78 Mass.App.Ct. 592, 595-96 (2011) (same). The predominant factor test essentially asks whether the outcome of a particular contest is predominately within the control of a participant, or is it predominantly subject to chance. To put it another way, a contest will likely be determined to be a game of skill if the likelihood of winning is primarily determined by an application of the participant’s skills. These applied skills can be of the physical sort, such as hitting a golf ball, or the mental kind, such as playing a trivia game. See, e.g., Berckefeldt v. Hammer 616 P.2d 183 (Colo. App. 1980) (holding that golf was a bona fide game of skill); see also, e.g., Rouse v. Sisson, 190 Miss. 276 (Miss. 1941) (holding that an electronic I.Q. game was not a prohibited gambling device). With regard to DFS, the primary question is whether DFS contest participants’ application of their knowledge and judgment in analyzing and predicting the results of real-world athletes in sports competitions is such that the DFS contests are determined to be “games of skill.”

Ramifications to the DFS Industry

By our count, there are at least 20 states that also use the predominant factor test. Should the Massachusetts Attorney General choose to issue an advisory opinion concluding that daily fantasy sports is illegal, though it would not be binding on the courts, it could have a pervasive effect across the states – especially in those also applying the predominant factor test. In those states, the Massachusetts Attorney General’s advisory opinion, whether favorable or unfavorable to DFS operators, could be used as particularly persuasive authority in analyzing DFS under their own anti-gambling or anti-lottery laws. We have already seen this happen within the last year, when one out-of-state gaming regulatory body (in Kansas) cited a Florida attorney general's opinion in concluding that "if a fantasy sports league has a buy-in (no matter what it is called) for its managers and gives a prize, then all three elements of an illegal lottery [e.g., chance, prize and consideration] are present." Although the Kansas regulator's opinion was later superseded by a subsequent attorney general's opinion and a legislative enactment legalizing fantasy sports in Kansas, the risks posed by an adverse Massachusetts Attorney General's opinion are fairly obvious: the existence of such an opinion could lead attorney generals, gaming regulators and courts in other states to likewise conclude that certain (or even many common) types of daily fantasy sports contests are illegal.

Of course, Ms. Healey, despite her political leanings, could always issue a formal opinion or advisory concluding that certain DFS contests are actually legal under Massachusetts law and the predominant factor test.[2]Such an opinion could have an analogous “unshackling” effect across the industry. And, there is support for such an opinion. For example, in April 2015, Star Fantasy Leagues (“Star”), an online DFS company, announced the resultsof an independent skill simulation study on its one-day fantasy football contests conducted during the 2014-15 NFL season. The study showed that, through empirical evidence, the results of Star’s fantasy football contests are predominated by skill, not chance.

Still, what makes the prospect of an adverse opinion even more disconcerting for the DFS industry is that the "predominant factor" test is considered the most lenient of the three commonly-employed state law tests for determining whether a particular contest constitutes an illegal lottery (the others being the "any chance" test and the "material element" test). Stated another way, if daily fantasy sports is deemed to be illegal under the "predominant factor" test (the most "DFS-friendly" of the three state law tests), then such contests could also presumably be considered illegal under the stricter "any chance" and "material element" tests, thereby raising the specter of daily fantasy sports being deemed illegal in many other states (the exceptions being the select states where it has been expressly made legal through legislative enactment, such as in Kansas and Maryland). This is a daunting prospect for an emerging industry that has largely operated without any state interference or regulation. The developing Massachusetts situation thus bears watching for an industry which suddenly finds itself under increasing scrutiny.

-- Daniel Wallach and Justin Fielkow

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[1]During her election campaign, Ms. Healey penned an article outlining her position on gambling expansion. In that article, Ms. Healey wrote that she is "opposed to expanded casino gaming" and "support[s] the . . . effort to repeal" the Massachusetts law authorizing casino gambling. She spoke of the "ills" of gambling, including that it "widens the income gap because gambling proceeds are regressive taxes" and "disproportionately affect[s] poorer people who have little discretionary money to lose in the first place."

[2]  If Ms. Healey fails to issue a formal opinion, one could also draw the inference that she reached the conclusion that there was “nothing to see here” with regards to daily fantasy sports. While legal clarity would certainly have its benefits, as it concerns the DFS industry, preservation of the status quo may actually be preferred.