California the attorney general could be the next big official to come up with an assessment of whether daily fantasy sports are legal under state law, following the New York Attorney General’s Cease and Desist Order To DraftKings and FanDuel.
Momentum for California AG to review DFS
The first tangible proof that California Attorney General Kamala Harris may review – or is already reviewing – the DFS industry manifested in a letter sent to Harris’s office last week by Member of the Assembly Marc Levine. The letter and the potential action were first reported by Ryan Kartje of OC Register.
Legal Sports Report has obtained a copy of the letter, which you can read here. He asks Harris the following:
This letter respectfully requests your office to take action to direct FanDuel, DraftKings and other fantastic sports betting sites to immediately cease operations in California.
Levine goes on to state that he does not believe that “fantasy sports betting” is permitted by state law.
He later said, “These games should be shut down in California until California law is clarified and consumers are protected.”
A NBC Bay Area report indicated that an investigation is on the table:
California Attorney General Kamala Harris’s office declined to comment, citing potential interference with the ongoing investigation into the Daily Fantasy Sports Teams.
Californian lawyer Ian Imrich also offered this on Twitter:
DFS and the law in California
California has generally not been considered a “gray state” in terms of DFS legality. All DFS operators accept state customers, and at least a few are state-based. (Of course, Nevada also fell into this category until the state attorney general and gaming commission came to the conclusion that DFS plays.)
At least two laws could potentially be applied to DFS in the state:
Section 19801 (d) of the Business and Professional Code
This is the law that Levine quotes in his letter:
(d) Unregulated gambling businesses are contrary to public health, safety, welfare and good order. Accordingly, no person in this state has the right to operate a gambling business except as expressly permitted by the laws of that state and the ordinances of local government agencies.
Penal Code §337a
At least one lawyer who consults with clients on gambling issues in California and Nevada – Vincent Olivier – considers that this law could be applied to DFS operators. He wrote a briefing on the legality of the DFS in California.
A letter sent to Assembly member Adam Gray of the group Defend California regarding a possible regulatory code reflects the idea that DFS sites may violate that code.
If this law is taken into account, the “skill game” argument may not apply.
Here is the full text of the code:
337a. (a) Except in the cases provided for in article 336.9, any person who engages in any of the following offenses, will be punished for a first offense with a term of imprisonment in a county jail for a period not exceeding not a year or in state prison, or a fine not exceeding five thousand dollars ($ 5,000), or both imprisonment and a fine:
(1) Joint sale or bookmaking, with or without writing, at any time and in any place.
(2) Whether for gain, rental, reward, or for free or otherwise, retains or occupies, for any time whatsoever, a room, a hangar, a building, a tent, a stand, a building, tank, ship, place, stand or enclosure, of any kind, or any part thereof, with any book or books, paper or papers, apparatus, device or paraphernalia, for the purpose of recording or recording any bet or betting, any purported wager or betting, bet or betting, any purported wagering or betting, selling pools, or supposed pools, on the outcome, or the supposed result, of any suit, alleged lawsuit, contest or alleged contest, of skill, speed or endurance power of a person or animal, or between people, animals, or a mechanical device, or on the result, or the purported result, of any lot, chance, accident, unknown or possible event whatsoever.
(3) Whether for gain, salary, reward, gratuitous or otherwise, receives, holds or transmits, or claims or claims to receive, hold or transmit, in any manner whatsoever, money, any thing or consideration of value, or the equivalent or memorandum thereof, wagered, pledged, wagered or wagered, or to be wagered, pledged, wagered or wagered, or offered for the purpose of being wagered, pledged, wagered or wagered, on the result, or purported result, of any event, or purported event, or contest, or purported competition, of skill, speed or endurance power of a person or of an animal, or between people, animals or mechanical devices, or on the result, or the purported result, of any lot, chance, accident, unknown event or contingent whatever it is.
(4) Whether for gain, hire, reward, or free of charge, or otherwise, at any time or place, record or record any bet or bet, bet or bet, on outcome, or purported result, of any lawsuit, or purported test or contest, or purported contest, of skill, speed or endurance power of a person or animal, or between persons, animals or mechanical devices, or on the result, or the claimed result, of any lot, chance, accident, unknown or contingent event whatsoever.
(5) Be the owner, tenant or occupant of a room, a hangar, a building, a tent, a stand, a building, a tank, a ship, ” a place, stand, enclosure or land, or any part thereof, whether for gain, rental, reward, or free of charge or not, allows this space is used or occupied for any purpose, or in any manner prohibited by subsections (1), (2), (3) or (4).
(6) Place, make, offer or accept any bet or bets, or bet or bets, on the result, or presumed result, of any try, or purported attempt, or contest, or purported contest, of skill, speed or power of the endurance of a person or animal, or between people, animals or mechanical devices.
Note: The Nevada GA classified DFS as “pooled betting” in a DFS legal analysis.
The climate for DFS in California
Before knowing that State AG might get involved, there had been relatively little gossip – at least publicly or in the media – about daily fantasy sports.
Assembly Member Adam Gray, who introduced a bill to regulate the DFS industry in September, indicated that he was in no rush to pass a law and wanted to take a “thoughtful approach”. There has not been a great outcry from state officials, otherwise, to act immediately on the DFS.
The bottom line for the DFS industry is that it can hardly afford to lose the player base in California – the most populous state in the country – especially with the possibility that sites may need to stop accepting clients in New York.
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