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With the increased popularity (or more likely, increased amount of advertising) of daily fantasy leagues, it is important to remind people that participating in fantasy leagues for any sport is not presently illegal. That is right – it is NOT ILLEGAL, contrary to popular assumption.
fantasyfootball
The Unlawful Internet Gambling and Enforcement Act of 2006 (UIGEA), which establishes the legal guidelines for online gambling, carves out a safe haven for any fantasy or simulation sports game that:

has an outcome that reflects the relative knowledge of the participants, or their skill at physical reaction or physical manipulation (but not chance), and, in the case of a fantasy or simulation sports game, has an outcome that is determined predominantly by accumulated statistical results of sporting events…

According to a Journal article by Anne Von Lehman, as of 2008 the UIGEA federal law blanketed all 50 States’ laws. However, some states have state legislation that some lawyers could interpret as questionable or unclear. Hence, most fantasy sports websites do restrict users from Arizona, Iowa, Louisiana, Maryland, Montana or Vermont from participating.
Fantasy sports are considered a game of skill – not a game of chance. And legal precedent agrees. The distinction between skill and chance is discussed in detail in a 2006 paper from the North Carolina Journal of Law & Technology. The paper cites earlier legal cases regarding video poker machines that determined the mere presence of chance cannot, in and of itself, classify an activity as gambling. Furthermore, fantasy football was finally put to trial in the 2007 New Jersey District Court case Humphrey v. Viacom, Inc. A 2007 article from the Illinois Business Law Journal details that case, in which a Colorado lawyer sued three pay-for-play online fantasy sites, and its result:

The court disagreed [with the plaintiff], however, and dismissed the case. In doing so, it indicated that fantasy sports are games of skill because players actively manage their teams, employing their sports knowledge and making strategic decisions.

Daily fantasy sports leagues are no different than season-long fantasy leagues. As long as the league you are in follows the same rules found in the UIGEA, it is perfectly legal:

  1. The daily fantasy roster cannot allow users to select, or make part of a roster spot, an entire team that is a member of an amateur or professional sports organization. (Ex: You shouldn’t be able to draft the entire Los Angeles Clippers to one of your roster spots)
  2. The prize(s) of a daily fantasy contest need to be made known to all participants in advance of the contest (Ex: Whatever the contest, how many spots are paid and what each of those spots is paid should be made available before you register.)
  3. The value of any prize(s) awarded in daily fantasy can not be determined by the number of participants or the ‘amount of fees’ paid by those participants.
  4. The scoring should be for individual players/athletes only, and that scoring should be calculated based on the individuals performance in multiple real-world sporting events or other events. (Ex: The Superbowl isn’t a legal option for Daily Fantasy sports, since all of the stats in your game would come from just 1 real-world game. This also reiterates that you can’t draft an entire team.)
  5. No aspect of scoring or how a team wins is based on the score, point spread, or any performance of any real team or teams. (Ex: Whether or not the Packers win should not effect Aaron Rodgers’s individual scoring. A tie-breaker shouldn’t be decided on how many runs the Milwaukee Brewers score, etc.)
  6. No aspect of scoring or how a team wins is based solely on 1 performance or 1 athlete/player in any 1 event. (Ex: Your daily fantasy roster has to have at least 2 roster spots.)