Florida Gaming Control Commission Turns a Critical Eye Toward Fantasy Sports Operators

The Florida Gaming Control Commission (FGCC) has taken a significant step by issuing cease-and-desist letters to three online fantasy sports operators. Though this marks the FGCC's first action against the online fantasy sports industry in Florida, it reflects a growing trend across the country in which several states are navigating the legal nuances between "fantasy" contests and gambling.

Legal Landscape in Florida and Industry Divide

The FGCC alleges that these operators may be accepting illegal wagers and conducting illegal lotteries involving Florida residents. "Under Florida law, betting or wagering on the result of contests of skill, such as sports betting, including fantasy sports betting, is strictly prohibited and constitutes a felony offense unless such activity is otherwise exempted by statute," the letters state. Media outlets promoting such activities also face potential legal consequences because "[a]dvertising for or otherwise aiding and abetting such illegal lotteries constitute separate felony offenses."

The legal landscape surrounding fantasy sports in Florida is complex. The law provides that "[w]hoever stakes, bets, or wagers any money or other thing of value upon the result of any trial or contest of skill, speed or power or endurance of human or beast … commits a felony of the third degree." Fla. Stat. § 849.14. The courts, however, have distinguished between "stake, bet or wager" and "purse, prize or premium." While the former is considered gambling, the latter is viewed more broadly and, if offered to a successful contestant in a game of skill, Florida courts have held that it is not generally considered gambling.

This legal nuance has led to a divide in the industry. Some argue that fantasy sports involve skill and purses, making them legal, while others contend they involve chance and wagers, rendering them illegal gambling. Proponents and opponents rely on opinions issued by the Florida Attorney General in 1990 and 1991, respectively, to support their arguments.

Implications and Ongoing Legal Battle

These cease-and-desist letters underscore the gravity of the allegations and the compliance risks faced by operators, media outlets and advertising agencies. They are poised to impact Florida's online fantasy sports industry, especially amid the ongoing legal battle related to the gaming compact, which is headed to the U.S. Supreme Court and the Florida Supreme Court in two separate challenges. It is worth noting that the language of the gaming compact suggests that fantasy sports are not currently authorized in Florida.

National Perspective

Florida is not alone in addressing this issue. In fact, a growing number of states have identified similar games and are investigating a handful of operators. In August, the New York State Gaming Commission and the Michigan Gaming Control Board proposed new regulations that would prohibit proposition selection or fantasy contests that mimic proposition contests and determined that the proposition contests found on certain fantasy sports websites, which purport to distinguish between player vs. house fantasy contests, are "essentially sports betting."

In July, both Wyoming and Maine sent a variation of cease-and-desist and complaint notices to two of the same operators that received the Florida cease-and-desist letters, warning them that their offerings "appear to fall under the exact definition of 'sports wagering'" as defined by the law. Meanwhile, Ohio continues to investigate several fantasy sports websites for allegedly offering illegal gambling.

However, regulators in other states – including Arizona, Colorado and Indiana – have cleared the path for some of these operators, but not without exerting additional scrutiny first. Colorado, for example, allowed the games only in a scaled-back version with two primary differences: 1) a user must pick at least four players, and 2) the selections are limited to the over/under total on a player's projected fantasy scores.

Navigating the Legal Maze

Determining the legality of specific games requires a nuanced, in-depth analysis on a state-by-state level and may necessitate clarifications from courts or legislatures. Compliance and timely responses to gaming commissioners' inquiries are critical.

Holland & Knight's Gaming Practice attorneys and professionals are available to assist businesses in the gaming sector navigate these regulatory challenges and ensure proactive compliance. For more information about the various regulators' letters, the nuances between the Florida Attorney General's opinions, and/or gaming operations and compliance in Florida and other states, please contact the author or another member of our Gaming Practice.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.