Perspective: Kirton McConkie Law Blog

Conducting a pay-to-play fantasy sports league may be gambling with the law

Participation in fantasy sports has exploded in the United States in the past few years. Anyone listening to sports radio or watching ESPN will be overwhelmed by advertisements from fantasy football organizations soliciting players. Thousands have joined the fantasy football fad in particular. Many participate for cash prizes.

Some employers have contemplated operating fantasy sports leagues for their employees to boost morale and build camaraderie among workers. However, employers should think twice before running a “pay-to-play” fantasy sports league for their employees. Charging an entry fee to play or participate in such a league with a chance of winning a monetary prize or the “pool” could be gambling depending on the location of the league.  

Federal law does not currently prohibit “pay-to-play” fantasy sports. They were expressly exempted from the Unlawful Internet Gambling Enforcement Act of 2006 as long as the participants do not bet on the outcome of a single game or a particularly player’s performance. The rationale was fantasy sports are considered games of skill, not games of chance. Assembling a fantasy team or “drafting” (i.e.--selecting) players for a fantasy team was thought to require some skill and engagement of the participant.

Yet, some states have outlawed pay-to-pay fantasy sports as games of chance. A handful of states, such as Arizona, Florida, Iowa, Arkansas, Tennessee, North Dakota, and Louisiana, appear to have banned fantasy sports for money in most cases. Nevada just declared fantasy sports to be gambling and subject to the state’s gambling regulations. Other states, such as Kansas, have frowned upon pay-to-play fantasy sports. 

Whether a pay-to-play fantasy sports league is illegal in Utah has not been expressly decided. Utah, like many states, prohibits gambling where participants pay to receive winnings based entirely on chance. It is easy to see how paying an entry fee to play in a fantasy sports league could likely be considered illegal gambling in Utah. If an employer chooses to operate a fantasy league in Utah (and many other states), the only sure way to avoid violating the law is to operate the fantasy league without an entry fee and ensuring that participation is not conditioned on putting something at risk. Simply, as long as your employees do not put any money or other items of value at risk, their participation in fantasy sports is not gambling.