Federal Judge Rules Against Derby Wars
A ruling handed down by a federal judge this week will allow a suit against fantasy horse racing site Derby Wars to continue. Judge James Otero determined in his ruling on May 15th that the fantasy contests run by Derby Wars constitute wagering and the site should be treated as an off-track betting outlet.
Monday’s ruling is just the latest development in a case that has been ongoing since 2015 between Derby Wars and the Stronach Group.
Stronach vs. Derby Wars Background
Derby Wars offers a form of fantasy sports betting with contests that revolve around actual horse races held around the country. Customers pay a fee to enter a contest and then draft a “team” of horses slated to run in upcoming races. Contestants then accumulate fantasy points when their horses place well in races. The contestant with the most points at the end of the contest wins a cash prize.
The Stronach Group owns a number of horse racing tracks around the United States and filed the suit against Derby Wars in late 2015. The Stronach Group alleges that Derby Wars is illegally offering betting services on races held at Stronach-owned tracks without permission and without paying any commission to those tracks.
Derby Wars argues that it does not offer horse racing betting as the suit claims. Instead, what they claim to offer is fantasy sports betting. A carve-out written into the Unlawful Internet Gambling Enforcement Act of 2006 exempts fantasy sports sites from anti-gambling laws.
However, the Stronach Group contends that what Derby Wars offers is just plain old horse racing betting. Under that viewpoint, Derby Wars is breaking the law by offering horse racing betting without authorization from any of the tracks or racing commissions as required by the Interstate Horseracing Act of 1978.
In short, the crux of the matter is that Derby Wars contends it is a daily fantasy sports site and is exempt from federal gambling laws as such. Derby Wars does not accept wagers on individual horses and instead runs itself as a fantasy sports site. The Stronach Group contends that Derby Wars effectively offers betting on horse racing and should be treated as such, which requires receiving permission from race tracks to offer contests that revolve around races held in the US.
Latest Development in the Case
Judge Otero ruled on Monday that the Derby Wars product should be treated as a form of horse racing betting. This is not the end of the matter, but it will allow the Stronach Group to move forward in seeking damages and an injunction under the understanding that what Derby Wars offers is horse racing betting.
In his ruling, Judge Otero wrote that “having determined that Derby Wars entry fees constitute a wager… the Court concludes that Defendants are operating an off-track betting system subject to the Interstate Horseracing Act.”
In speaking on the latest ruling, Scott Daruty of the Stronach Group said:
“This is not the end of our lawsuit, but this is a big step forward. The issue of whether this is a wager and whether this is covered by the [Interstate Horseracing Act] is now settled.”
Mark Midland of Derby Wars stated:
“We are disappointed with the court’s ruling but intend to press forward with our defense and are evaluating our options to appeal the court’s order. We believe Derby Wars has created a product that is innovated and advances horse racing in a sport that needs more innovation.”
Will this have a wider effect on daily fantasy sports in general?
Legal Sports Report discussed the potential ramifications this ruling could have on the broader DFS industry. They spoke with several attorneys who expressed different points of view regarding what effects if any, this ruling will have on the DFS industry in the United States.
One attorney they spoke with believes the Derby Wars case will have minimal impact on DFS in general because the ruling hinged upon Derby Wars being based on horse racing, which is the key aspect that brought the Interstate Horseracing Act into play. If Derby Wars had been a regular fantasy site focused on other sports, this case would have gone nowhere because the crux of the argument was based on whether or not Derby Wars is subject to the Interstate Horseracing Act.
Another attorney they spoke with believes the ruling could impact DFS because Judge Otero’s ruling is the first time DFS entry fees have been defined as “bets” or “wagers” in a US court. That ruling may later cause trouble for DFS operators in other court cases and lawsuits.
Mike Murphy is the founder of BettingUSA.com and has over 10 years of experience in the legal gambling industry. A regular attendee of industry trade shows and conferences, Mike is a strong proponent in the idea of a well regulated online betting industry.
