The Attorney General in Texas is the Latest to Declare DFS Illegal

Texas Attorney General Ken Paxton (R) agrees with opinions issued in Illinois, New York, and Nevada that Daily Fantasy Sports (DFS) operators are violating state law and operating illegal gambling enterprises.

In response to a query from Texas State Rep. Myra Crownover (R-District 64), AG Paxton linked the elements of chance associated with the contests to gambling.

AG Paxton stated that paid daily fantasy sports operators claim they can legally operate, but none of their arguments square with existing Texas laws. He explained that because the outcome of games in Daily Fantasy Sports leagues depends partially on chance, and participants pay an entry fee, this constitutes a bet.

Unlike his counterparts in Nevada and New York—AGs Adam Laxalt and Eric Schneiderman—Paxton did not announce legal repercussions or order DFS market leaders DraftKings and FanDuel to cease operations in his state. Yet.

So Are You Telling Me There's a Chance?

AG Paxton is uninterested in debating whether Daily Fantasy contests constitute gambling or skill-based competitions. In Texas, just the slightest element of chance overrides all other factors.

He noted that unlike some states, Texas law requires only a "partial chance" for an activity to be considered gambling; it does not require chance to predominate.

Paxton's second issue with DFS is the house's involvement, akin to casinos facilitating poker games. The house charges a fee but does not take a cut of losses.

In Paxton's view, traditional fantasy sports have no house and are not gambling, whereas DFS is.

He added that if DFS operators avoided taking a cut from entry fees and paid out the entire pot—as most regular fantasy leagues do among friends—it might bolster their case, though it would bankrupt them.

Put simply, Paxton asserts that Texas law prohibits gambling where players bet on the performance of sporting event participants and the house takes a cut.

DFS operators responded to Paxton's declaration, accusing him of a "fundamental misunderstanding of DFS."

FanDuel stated the advisory opinion was based on his misinterpretation of the law and misunderstanding of fantasy sports facts.

Both operators intend to continue operating lawfully in the state.