June 10th, 2010

Lobbying Might be Way for Fantasy Industry to Go

Thursday, June 10th, 2010

Lawyer Travis McCoy provided a particularly valuable presentation on the first morning of the FSTA summer conference Wednesday, detailing the nine states that have been giving fantasy companies trouble.

Louisiana has been the one in the news lately, but Arizona, Iowa, Maryland, Montana, North Dakota, Tennessee, Vermont and Washington all present gambling laws that either directly outlaw or create a fog of illegality concerning residents paying for a chance to win at fantasy games.

McCoy ran through the various specifics in each state’s law that presents trouble for fantasy. He related that despite differing language, it’s probably not safe at this point to residents of those nine states to compete in your pay-to-play games.

Beyond that, though, even free games can be tricky. Anti-gambling statutes tend to focus on participants risking something of value, which we tend to think of as a buy-in or entry fee. McCoy, however, pointed out that state courts have set the “something of value” bar pretty low — meaning that fantasy companies should be careful and probably seek legal advice in setting the parameters for even their free games.

Of course, the Louisiana story grew because of an effort to change that state’s rules. The stark failure of that effort and the fact that consecutive Maryland bills haven’t even reached a vote on the floor highlights the need for lobbying work from the fantasy industry.

Legal challenges could be possible, as McCoy pointed out — particularly in relation to the federal Commerce Clause. The Supreme Court has interpreted from that clause the “dormant” Commerce Clause, which McCoy summed up this way: “A state’s law may be ruled unconstitutional if that law places an undue burden on interstate commerce.”

McCoy said he would consider the restrictions on fantasy payouts in certain states damaging to interstate commerce.

The problem with challenging the laws is that it would be a costly, lengthy process whose outcome might be trickier. It would be open to judge interpretation of existing laws.

The lobbying front could work to educate and encourage politicians, seeking to push for introduction of new legislation — such as the bills recently presented in Louisiana and Maryland.

We saw the lack of knowledge about fantasy in Louisiana, where it took just a single e-mail blast from the misguided Louisiana Family Forum to scare off all but 16 House delegates. Rep. Thomas Carmody said he has no plans to pursue another bill, and he and his colleagues would have little motivation to pursue something that is a very minor issue to them and brings potential political downside.

In Maryland, a House bill has been brought two years in a row to legalize fantasy payouts. Neither iteration has even made its way to the floor for a vote.

We’ll see what the FSTA and companies throughout the fantasy industry decide to do going forward, but it’s becoming clearer that they need to do something.