FanDuel to Exit Texas; DraftKings Will Fight

FanDuel DFS announced yesterday that it will stop accepting real money customers from Texas on May 2nd, 2016. The announcement comes about two weeks after Texas Attorney General Ken Paxton issued an opinion that daily fantasy sports contests are illegal under Texas law. If nothing changes soon, our readers from Texas will no longer be able to play for real money at FanDuel starting in May.

The decision comes as a part of a settlement agreement FanDuel reached with the state of Texas. In return for the Texas AG not pursuing legal action against the company, FanDuel with withdraw from Texas no later than May 2nd.

In a statement published on the AG’s website, Ken Paxton said he commends FanDuel for “responsibly and pro-actively working with us to reach this settlement. 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.”

The press release further notes that Texas law only requires “partial chance” for an activity to be classified as gambling. So even if you ascribe to the notion that daily fantasy sports are mostly skill, even a little chance is enough to make it fall afoul of Texas gambling laws. Traditional fantasy leagues will remain legal as long as 100% of all entry fees are returned to players in the form of prizes (i.e. the house doesn’t take a cut).

DraftKings DFS will be taking a markedly different approach. They have no intention to roll over and every intention to take the issue to the courts. Dallas News noted that DraftKings has already filed a petition for a declaratory judgment in Dallas seeking a ruling on the legality of DFS contests in Texas.

Randy Mastro, legal counsel for DraftKings, said that they “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” such as “bass fishing, bull riding, stock picking and even beauty pageants, all of which involve participants paying entry fees and then using their wits and skills to try to win a predetermined prize.”

Texas is a big market for daily fantasy sports in the United States, so it’s not surprising to see at least one fantasy site take a stand. However, both sites do plan to fight the good fight moving forward. FanDuel also has plans to advocate for legislation in Texas’ 2017 legislative session.

Both daily fantasy sports sites have been campaigning along with the Fantasy Sports Trade Association for DFS-friendly legislation across the nation. As we’ve noted in other blog posts, numerous states have introduced legislation that looks similar from one state to the next. The industry is facing tons of political pressure right now, but the big players have already displayed a dogged determination to establish themselves in the United States for the long term.

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