Caveat Vendor

Kansas Recognizes Fantasy Sports

May 21, 2015

Behnam Dayanim

Kansas Governor Sam Brownback may be a social conservative, but he apparently does not object to fantasy sports.  On Tuesday of this week, Gov. Brownback signed into law a bill that will recognize fantasy sports as lawful in the Sunflower State.

The law, which passed the legislature overwhelmingly, mimics the fantasy sports “safe harbor” contained in the federal Unlawful Internet Gambling Enforcement Act.  It exempts from the definition of “bet” a fantasy sports league that meets several criteria:

(1) All prizes and awards offered to winning participants are established and made known to the participants in advance of the game or contest and their value is not determined by the number of participants or the amount of any fees paid by those participants;

(2) all winning outcomes reflect the relative knowledge and skill of the participants and are determined predominantly by accumulated statistical results of the performance of individual athletes in multiple real-world sporting events; and

(3) no winning outcome is based:

(A) On the score, point spread or any performance or performances of any single real-world team or any combination of such teams; or

(B) solely on any single performance of an individual athlete in any single real-world sporting event.

The law separately imposes certain limitations on charitable gaming.

The new law will not have a dramatic impact on the burgeoning fantasy sports landscape, as most major fantasy sports operators already permitted participation from Kansas.  However, the August 2014 proclamation by the Kansas Racing and Gaming Commission that, in its view, fantasy sports were illegal lotteries had raised concerns among many observers.
The new law, which takes effect on July 1, will not end the debate entirely.  Daily fantasy sports today often involves head-to-head or other competitions in which the prize value, although predetermined and communicated before the start of the contest, does bear a relationship – sometimes directly – to the amount of entry fees paid.  Whether that characteristic comports with the first of the UIGEA and new Kansas criteria is unsettled, although in at least one case (the only case to date), Humphrey v Viacom Inc, a federal court found a similar prize structure did comply with that requirement.   See also https://web.archive.org/web/20060510064941/‌http://‌baseball.sportsline.com/splash/‌baseball/‌spln/single/faq (website for league at issue in that case).

Although the Kansas legislation by itself may not move the needle on U.S. fantasy sports, several other states are considering legislation on the subject.  It is clear that the increasing publicity and revenue associated with fantasy sports has attracted legislators’ attention.  Where that attention leads will portend much for the direction of the industry.

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