The Texas House of Representatives has voted to move a bill forward to the Senate that will define Daily Fantasy Sports (DFS) as a game of skill and thereby making it a legal pastime. House Bill 2303 was introduced by Rep. Joe Moody (D-El Paso) and sailed through on a 116 – 27 vote on May 1st. The House voted to give the measure its final approval one day later.
The gist of the bill is to classify DFS as contests of skill, which are already legal under Texas gaming law. The passage of this bill would finally make DFS legal in one of the most populous states in the US.
Although progress on the bill is good news as it would give fantasy sports sites firm legal footing in Texas, it would change little on the ground for players. FanDuel and DraftKings both operate in Texas today despite the uncertain legal situation. Both sites have in the past restricted Texas customers but have subsequently reentered the state. Legal clarity will be beneficial for FanDuel, DraftKings and other DFS sites.
Clarifying State Law
Rep. Moody, an attorney who sits on Texas’ Business and Industry House Committee, explained his reasoning for attempting to get the bill through to the Senate:
“House Bill 2303 simply seeks to clarify state law and confirm that skill-based fantasy sports are legal and therefore not an act of gambling,” he said. “It’s very similar to what 19 other states in the country have done in recent years, and the United States Congress made this change in 2006.”
“The law itself in the penal code isn’t clear whether you can grab up the conduct of close to 4 million Texans and have it criminalized,” he added.
In January, 2016, Attorney General Ken Paxton issued an opinion that likened fantasy sports sites to online gambling, which is illegal in Texas. His opinion was that DFS contests violated state laws because they depend on how athletes perform during a specific game, making it a game of chance.
Here’s how he explained his opinion at the time:
“Under section 47.02 of the Penal Code, a person commits an offense if he or she makes a bet on the partial or final result of a game or contest or on the performance of a participant in a game or contest. Because the outcome of games in daily fantasy sports leagues depends partially on chance, an individual’s payment of a fee to participate in such activities is a bet. Accordingly, a court would likely determine that participation in daily fantasy sports leagues is illegal gambling ‘under section 47.02 of the Penal Code.”
Attempts to Push Similar Bills Through
Moody’s bill gives hope to frustrated DFS operators and fans who have watched similar bills pop up and die before progressing through the legislative process.
Two similar bills have failed to muster the momentum they need to move ahead. Rep. Richard Pena Raymond’s Bill sought to “clarify a confusing and ambiguous law and affirm that fantasy sports are legal in Texas.”
“The government should not be limiting the freedom of Texans to participate in fantasy sports contests, which are clearly a game of skill,” Raymond told Legal Sports Report when he first tried to introduce it.
Raymond’s bill HB 1544 failed to receive an affirmative vote in the committee last month.
The second bill that failed to go through was legislation by state Sen. Lois Kolkhorst.
FanDuel and DraftKings Back Changes
Cheering Moody’s bill from the sidelines are FanDuel and DraftKings, which back the Texas Fantasy Sports Alliance. A spokesperson for the group said that it wanted to show AG Paxton that DFS websites were totally above board.
A spokesperson for the Alliance said Texans have been playing fantasy sports for decades and pointed out that 4 million do so in the state each year.
“We look forward to continued progress in the Texas Legislature to protect fantasy sports players and Texas-based businesses supporting this industry and this much-need[ed] modernization of the Texas Penal Code,” said the group.
Soon after Paxton passed his opinion in 2016, FanDuel exited the Texas daily fantasy sports market. Before doing so, however, FanDuel vowed to be back and said that it would work tirelessly to pass legislation and bring its paid contests back to Texas as soon as possible. It seems to have kept its word and its efforts are paying off.
DraftKings decided to stay and dispute the Attorney General’s decision and launched a legal challenge. In its legal complaint, the group insisted that all fantasy sports are contests of skill. The site claimed contestants in fantasy contests act as general managers of their fantasy teams and in that role, they use their skill and knowledge of the sport and athletes to select their fantasy rosters.
In August last year, FanDuel returned to Texas and resumed its business after a two year hiatus. No official statement was made about the return.
Texas Shies Away From Gambling
Texas is not in the category of states that have a particular love affair with anything gambling-related, which explains the Attorney General’s opinion in 2016.
The return of FanDuel to the ring, the constant-presence of DraftKings and the shift of public opinion to see the legalization of daily fantasy sports has set the stage for another type of gambling that could enter the state: sports betting.
Texas, with a population of nearly 30 million, has the potential to become one of the biggest sports betting markets in the United States if a reasonable legalization law is ever passed.