A garden-variety breach of contract suit quickly became a case with precedent setting potential for the Daily Fantasy Sports (“DFS”) industry when, in a weird twist, one of the leading providers of DFS games asked a federal court in Minnesota to declare its fantasy sports offerings illegal under state and federal law.[i]
MINNESOTA WILD VS. EMIL INTERACTIVE GAMES
In May 2016, the National Hockey League’s Minnesota Wild filed a three-count Complaint in Minnesota against Emil Interactive Games (“Interactive Games”) – the parent company of DFS operator Draft Ops – alleging claims of breach of contract, account stated, and unjust enrichment. Per the Complaint, the Wild allege that, on September 4, 2015, it entered into a sponsorship agreement with Interactive Games, whereby Interactive Games would pay the Wild for the right to advertise at the Wild’s home arena. The Wild now claim that Interactive Games has refused to make the payments due under the sponsorship agreement and that it currently owes the Wild over one million dollars.
LACK OF JUDICIAL PRECEDENT
The federal court’s response to Interactive Games’ argument will be particularly important to the DFS industry, because it is largely a case of first impression. While recent cases have touched on the legality of fantasy sports, no federal court has ever expressly ruled on the legality of DFS. For example, in 2007 the U.S. District Court for the District of New Jersey held that the payment of a one-time, nonrefundable entry fee to participate in seasonal fantasy sports did not constitute an illegal wager or bet pursuant to a New Jersey Qui Tam statute.[iv] The court in Humphrey v. Viacom, Inc., however, only opined on the legal status of traditional, season long fantasy games – not DFS contests. Further, the Humphrey court also did not address the issue of whether fantasy sports leagues are “games of chance” in deciding the case.
Since the Supreme Court of New York’s ruling in December, lobbyists for the fantasy sports industry have embarked on an unprecedented state-by-state push for legislation clarifying the legal status of fantasy sports. Yet in many states – particularly in those where there legislation does not appear imminent – companies offering DFS contests continue to operate in a legal “gray” area, in large part due to the lack of judicial precedent directly analyzing the legality of DFS.