Fantasy sports leagues that charge entry fees and award cash prizes are a largely unregulated industry. Internet sites that sponsor these leagues, however, are coming under scrutiny: according to the Wall Street Journal, the Department of Justice has announced it may investigate these sites’ operations, and sites offering one-day fantasy-league contests in Nevada must now obtain a gaming license.
The obvious question is what types of fantasy sports contests are legal when they involve the exchange of money, given the many laws against gambling. The question is important not only for the Internet sites under investigation, but for the people who participate in them and for those who would like to operate their own competing league.
This post summarizes the federal and California law governing contests in the fantasy sports world. That law is a patchwork of statutes and court decisions, and requires a separate analysis of each contest. There are certain hallmarks of legal games, however, that can guide the structuring of fantasy sports contests so that they comply with California and federal law.