The Honorable Myra Crownover Chair, Committee on Public Health Texas House ofRepresentatives Post Office Box 2910 Austin, Texas 78711-2910 Dear Representative Crownover: 

### KEN PAXTON ATTORNEY GENERAL OF TEXAS January 19, 2016
OpinionNo. KP-0057 Re: The legality of fantasy sports leagues under Texas law (RQ-0071-KP)

You ask for an opinion on two questions involving fantasy sports leagues. 1 Specifically, you ask whether 1. [ d]aily fantasy sports leagues such as DraftKings.com and FanDuel.com are permissible under Texas law, and 2. [whetheri]tis legalto participate in fantasy sports leagues where the house does nottake a "rake" and the participants 0nly wager amongst themselves. Request Letter at 1. I. Factual Background To begin, a brief description of what we understand you to mean by "fantasy sports leagues" is necessary. 2 Fantasy sports leagues allow individuals to simulate being a sports team owner ormanager. Generally, an individual assembles ateam, or lineup, oftenunder a salary limit or budget, comprising actual players from the various teams in the particular sports league, i.e., National Football League, National Basketball League, or National Hockey League. Points are

'See Letter from Honorable Myra Crownover, Chair, House Comm. on Pub. Health, to Honorable Ken Paxton, Tex. Att'y Gen. at 1 (received Nov. 12, 2015), https://www.texasattorneygeneral.gov/opinion/requests-foropinion-rqs ("Request Letter"). 2The forthcoming description of fantasy sports play is compiled generally from the October 16, 2015, Memorandum fromtheNevadaAttorney General's Office, to whichyou refer, concerningthe legality ofdaily fantasy sports. See generally Memorandum from J. Brin Gibson, Bureau Chief of Gaming & Gov't Affairs & Ketan D. Bhirud, Head of Complex Litig., Nev. Att'y Gen., to A.G. Burnett, Chairman Nev. Gaming Control Bd. & Nev. Gaming Control Bd. Members Terry Johnson & Shawn Reid (Oct. 16, 2015), http://gaming.nv.gov/ modules/showdocument.aspx?documentid=10487 ("Nev. Att'y Gen. Memo").The Honorable Myra Crownover

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garnered for the individual's "team"based onthe actual gameperformance ofthe selectedplayers, and scoring is based on the selected player's performance in the game where actual performance statistics or measures are converted into fantasy points. Each participant "owner" competes against other owners in the fantasy league. In a traditional fantasy sports league, play takes place over the course of an entire sports season, tracking the performance of selected players for the duration of the season. In contrast, in daily fantasy sports leagues, play tracks players' performances in single games on a weekly basis. With respect to both types offantasy games, once a participant selects his or her players as the team or "lineup,'' they have no control over the players' performance inthe actual game orthe outcome ofthe actual game. The participant waits for the outcome, and his or her point levels are determined by the performance ofthe players on game day. Individuals pay a fee to participate in a league, which fees fund the pot ofmoney used to pay out to the participants as their earned points direct. In play on the Internet sites for DraftKings and FanDuel, a portion (ranging from 6% to 14%) ofthe fees collected are not paid out to the participants but are retained by the gaming site. The "commissioner" running a traditional fantasy sports league may or may not retain a portion ofparticipants' entry fees. Turning to the law, article III, section 47(a) ofthe Texas Constitution provides, "[t]he Legislature shallpass laws prohibiting lotteries and gift enterprises inthis State," subjectto certain exceptions. 3 In accordance with article III, section 47(a), the Legislature has prohibited a variety of gambling activities through chapter 47 of the Penal Code. 4 In Texas, a person commits a criminal offense ifthe person "makes a bet onthe partial or final result ofa game or contest or on the performance ofaparticipant in a game or contest."5 The answerto your first questionturns on whether participants make a bet. Under chapter 47, a "bet" means "an agreement to win or lose something ofvalue solely or partially by chance."6 And a bet specifically excludes "an offer ofa prize, award, or compensationto the actual contestants in abonafide contestfor the determination ofskill, speed, strength, or endurance or to the owners ofanimals, vehicles, watercraft, or aircraft entered in a contest[.]"7 Lastly, it is a defense to prosecution if, among other things, "no person received any economic benefit other than personal winnings," 8 which cannot be true ifthe house takes a "rake."

3TEX. CONST. art. III,§ 47(a); see City ofWink v. GriffithAmusement Co., 100 S.W.2d 695, 701 (Tex. 1936) (articulating as elements necessary to constitute a lottery (1) the offering ofa prize, (2) by chance, and (3) the giving ofconsideration for an opportunity to win the prize). 4See TEX. PENAL CODE§§ 47.01-.10; see also Owens v. State, 19 S.W.3d 480, 483 (Tex. App.-Amarillo 2000, no pet.) (recognizing the Legislature's adoption ofchapter47 pursuantto article III, section 47). 5TEX. PENAL CODE§ 47.02(a)(l). 6 /d. § 47.01(1). 7 /d. § 47.0l(l)(B). 8 /d. § 47.02(b)(2).The Honorable Myra Crownover

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II. Standard ofReview These questions require us to examine competing statutory provisions. The courts have developed time-honored canons for reconciling tension within a statute. According to the United States Supreme Court,
canons ofconstruction are no more than rules ofthumb that help courts determine the meaning oflegislation, and in interpreting a statute a court should always turn first to one, cardinal canon before all others. We have stated time and again that courts mustpresume that a legislature says in a statute what it means and means in a statute whatit says there. Whenthe words ofa statute are unambiguous, then, this first canon is also the last:judicial inquiry is complete.9 This cardinal canon is bestimplementedby examining the plain contextual meaning ofa statutenotbyimproperlyremovillg a snippet from the statutory context. 10 A court "mustnotinterpretthe statute in a manner thatrenders any part ofthe statute meaningless or superfluous." 11 In the attorney general opinion process, we cannot resolve factual issues. 12 But we can assume facts ifrequested, as you have here. 13 III. Analysis A. Paid Daily Fantasy Sports Your first question is whetherpaid daily fantasy sports leagues constitute illegal gambling. Answering your question requires determining whether paid daily fantasy leagues constitute betting ontheperformance ofaparticipantina game (thus constitutingillegal gambling) orinstead are, in and ofthemselves, bonafide contests for the determination ofskill (thus constituting no bet andno illegal gambling). Paid daily fantasy league participants are wagering on "theperformance of a participant in a game or contest." 14 Ifthat act constitutes a bet under the statute, then the

9Conn. Nat'!Bankv. Germain, 503 U.S. 249, 253-54 (1992) (citations omitted). 10See Cascos v. Tarrant Cty. DemocraticParty, No. 14-0470, 2015 WL 6558390, at *5 (Tex. Oct. 30, 2015) (reversing a court ofappeals when its opinion "improperly takes a snippet oflanguage out ofits statutory context"); In reMem '!HermannHosp. Sys., 464 S.W.3d 686, 701 (Tex. 2015) ("Proper construction requires readingthe statute as a whole rather than interpreting provisions in isolation."). llSee ColumbiaMed. Ctr. of Las Colinas, Inc. v. Hogue, 271S.W.3d238, 256 (Tex. 2008). 12Tex. Att'yyen. Op. No. KP-0046 (2015) at4 (notingthat attorney general opinions do notresolve disputed fact questions). 13See Request Letter 1 ("Please assume the following facts, as more fully explained in an October 16, 2015 memo from the Nevada attorney general's office to the Nevada Gaming Control Board."). 14TEX. PENAL CODE§ 47.02(a)(l).The Honorable Myra Crownover

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activity is illegal gambling. Participants in a daily fantasy sports league pay a fee to participate, 15 only 

## aportion ofwhich is included in the pot offunds that are paid out to the winning "owners." Byprofferingthis fee, players agreeto win or lose something ofvalue-aportion ofthepot. 16 The dispositive question then is whether the win or loss is determined solely or partially by chance. Proponents ofdaily fantasy sports games argue that skill is required to predict which players will have the best performance for their position in any particular game. 17 This may well be true. However, Texas law does not require that skill predominate. Instead, chapter 47 requires only a partial chance for there to be a bet. 18 Texas courts have confirmed this plain language in the statute. 19 Andthis office has previously concludedthat "theplainlanguage ofsection47.01(1)
.. . renders irrelevant the matter ofwhether poker is predominantly a game ofchance or skill
.... If an element of chance is involved in a particular game, it is embraced within the definition of 'bet."'20 It is beyond reasonable dispute that daily fantasy leagues involve an element of chance regarding how a selected player will perform on game day. The participant's skill in selecting a particular player for his team has no impact on the performance ofthe player or the outcome of the game. In any given week:
• a selected player may become injured or be ejected and not play in all or a portion ofthe game-suchas aninjuryto athird-string quarterbackcausing ateamtorotate

15We understand that some daily fantasy sports contests charge no fee to participate and pay nothing to the winners. Brieffrom James Ho, Gibson Dunn, to Honorable Ken Paxton at 2, 8, 9 (Dec. 21, 2015) ("GibsonDunn Brief') (on file with the Op. Comm.). Participation in such contests involves no consideration and no bet, and as a result cannot constitute illegal gambling in Texas. See City ofWink, 100 S.W.2d at 701. 16TEX. PENAL CODE§ 47.01(9) (defining a "thing ofvalue" to generally mean "anybenefit"). 17

See GibsonDunnBriefat 18-25;Brieffrom Reid Wittliff, ZwillGen, to Honorable Ken Paxton at 6-7 (Dec. 18, 2015) ("ZwillGen Brief') (on file with the Op. Comm.). 18See TEX. PENAL CODE§ 47.01(1) (a "bet" means "an agreement to win or lose something ofvalue solely or partially by chance"). 19

See Odle v. State, 139 S.W.2d 595, 597 (Tex. Crim. App. 1940) ("The legal meaning ofthe term 'bet' is the mutual agreement and tender ofa gift ofsomething valuable, which is to belong to one ofthe contending parties, according to the result ofthe trial ofchance or skill, orboth combined." (quoting Melton v. State, 124 S.W. 910, 911 (Tex. Crim. App. 1910), Mayo v. State, 82 S.W. 515, 516 (Tex. Crim. App. 1904), and Words and Phrases, Second Series, Vol. 1, p. 433); State v. Gambling Device, 859 S.W.2d 519, 523 (Tex. App.-Houston [1st Dist.] 1993, writ denied) ("[I]t is the incorporation ofchance that is the essential element ofa gambling device, not the incorporation ofa particular proportion ofchance and skill."). 20Tex. Att'y Gen. Op. No. GA-0335 (2005) at 3-4.The Honorable Myra Crownover

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three different players at quarterback in one half 21 or a batter charging the mound after getting hit by a pitch and getting corrected and then ejected;22
• a selected player may perform well or perform poorly against the opponent that week, perhaps due to weather conditions-such as a defensive tackle diving on a football after a blocked field goal attempt, only to allow the other team to recover the ball and score the game-winning touchdown;23
• a selected player's performance may be impacted by the state of the game equipment (say, the underinflation of a football or the presence of cork inside a baseballbat)24 orfacilities (such as the air conditioning systeminabasketball arena failing, causing the starplayerfor ateam aptly named "Heat"to suffertemperature induced legs cramps and be carried offthe court);25 and
• a selectedplayer's performance maybe impacted by a call ofrefereeing officialssuch as a catch that all individuals not wearing stripes believe to constitute a touchdown being ruled an incompletion with instant replay.26 The list goes on. All ofthese random circumstances, especially ifthey occur aftertheparticipants' selections are locked in, amount to chance and do not involve any skill on the part of the participant. Chance happens, especially on game day. "That's why theyplaythe game."27 Based

21John Werner, Everybody hurts: Another QB injured, Bears stumble in homefinale, 23-17, WACO TRIB., (Dec. 6, 2015), http://www.wacotrib.com/sports/baylor/football/everybody-hurts-another-qb-injured-bears-stumblein-home-finale/article 4e58l922-a55e-5289-a7c7-dfa43cal5a5a.html. 22See Thomas Neumann, Nolan Ryan-Robin Ventura fight anniversary-13 things you should know, ESPN.com, (Aug. 4, 2015), http://espn.go.com/mlb/story/_/id/13375928/nolan-ryan-robin-ventura-fight-anniversary13-things-know. 23Daniel Hajek, Cowboys'Leon Lett On 'One OfThe Worst Days Of My NFL Career,' NAT'L PUB. RADIO, (Nov. 27, 2015), http://www.npr.org/2015/11/27/457565031/cowboys-leon-lett-on-one-of-the-worst-days-of-my-nflcareer. 24Ian Rapoport, More details on the investigation of Patriots' deflated footballs, NFL.com, (Feb. 1, 2015), http://www.nil.com/news/story /Oap3000000466783/article/more-details-on-the-investigation-of-patriots-deflatedfootballs; Rick Weinberg, Sammy Sosa gets caught with corked bat, ESPN.com, (Aug. 4, 2004), http://www.espn.go.com/ espn/espn25/story?page=moments/33. 25Royce Young, Spurs: AC back up and running, ESPN.com, (June 6, 2014), http://www.espn.go.com/nba/playoffs/2014/story/_/id/11042810/san-antonio-spurs-say-air-conditioning-their-arenarepaired.26Brandon George, Was it a catch? ControversialDez Bryantplay reversed, DALLAS MORNINGNEWS, (Jan. 11, 2015), http://www.sportsday.dallasnews.com/ dallas-cowboys/cowboysheadlines/2015/01/11/was-it-a-catchcontroversial-dez-bryant-play-reversed. 27Bud Montet, Random Shots, MORNING ADVOC., Dec. 30, 1965, at 2C (attributing quote to University of Kentucky basketball coach Adolph Rupp), see THE BIG APPLE, That's why they play the games (sports adage), http://www.barrypopik.com/index.php/new _york _city/entry/thats_ why _they __play_the _games.The Honorable Myra Crownover

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on the facts you ask us to assume, the argument that skill so predominates that chance is minimal is nonetheless an admission that chance is an element and partial chance is involved.28 Accordingly, odds are favorable that a court would conclude that participation in daily fantasy sports leagues is illegal gambling under section 47.02 ofthe Penal Code.29 Twoproviders ofdailyfantasy sports leagues nonetheless contendthatparticipationin such leagues is not gambling because the statutory exception to the definition of "bet" excludes "an offer of a prize, award, or compensation to the actual contestants in a bona fide contest for the determination ofskill[.]"30 Specifically, they contendthe elementofskill so predominates in daily fantasy sports as to render chance immaterial and thatthe fantasy league participants are the actual contestants. While Texas courts have yet to address the actual-contestant exclusion from the definition of "bet," this office addressed that matter in 1994. The question presented involved participants paying an entry fee for a chance to win prizes in a contest to forecast the outcome of approximately 150 sporting events, which required "using the skills necessary to analyze relevant data, including, but not limited to, point differentials as published in newspapers of general circulation, weather conditions, injuries or other factors." 31 We noted that the Practice Commentary to the statute indicated the actual-contestant exclusion "is intended to exclude only awards and compensation earned by directparticipationinthe contest-thepole-vaulter's cup, the pro football player's salary-not the receipt ofa wager made on its outcome."32 We concluded that, although the "exclusion may embrace athletes actually competing in the sporting events you refer to, it does not embrace those who pay entry fees for a chance to win a prize from forecasting the outcome of the events."33 Moreover, the other types of contests in the actual-contestant exclusion (speed, strength, or endurance or to the owners of animals, vehicles, watercraft, or

28The attorneys general in Nevada and New York have reached the conclusion thatthere is sufficient chance to violate the "material chance" standard in their state laws. See Nev. Att'y Gen. Memo at 9, 15-16; Letter from Kathleen McGee, Chief, New YorkAttorney General's InternetBureau, to Jason Robins, CEO, DraftKings, Inc., (Nov. 10, 2015) at 1, http://ag.ny.gov/pdfs/Final_NYAG_DraftKings_Letter_l 1_10_2015.pdf ("DraftKings' customers are clearly placing bets on events outside oftheir control or influence, specifically on the real-game performance of professional athletes. Further, each DraftKings wager represents a wager on a 'contest ofchance' where winning or losing depends on numerous elements ofchance to a 'material degree."'). See alsoNew York v. DraftKings, Inc., No. 453054-2015, at 7, 10 (N.Y. Sup. Ct. Dec. 11, 2015), New York v. FanDuel Inc., No. 453056-2015, at 7, 10 (N.Y. Sup. Ct. Dec. 11, 2015) (orders determining that the payment ofan entry fee to participate in daily fantasy sports is risking a thing ofvalue and, underNewYork statutes, constitutes illegal gambling and grantingpreliminary injunction and temporaryrestraining order against defendant in each action). 29Likewise, entities that promote daily fantasy sports league gambling could possibly violate section 47.03 ofthe Penal Code by operating a gamblingplace orbecoming a custodian ofa bet. See TEX. PENAL CODE § 47.03(a). 30TEX. PENAL CODE§ 47.0l(l)(B). See GibsonDunn Briefat 17; ZwillGen Briefat 4. 31Tex. Att'y Gen. Op. No. L0-94-051, at 1. 321d. at 2. 331d.The Honorable Myra Crownover

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aircraft) inform the nature ofwhatthe Legislature means with the term "skill."34 Following this office's 1994 opinion, the Illinois Attorney General recently concluded that Illinois's similar statutory actual-contestant exclusion does not apply to participants of daily fantasy sports leagues. 35 Subsection 47.0l(l)(B), and our interpretation ofit, remains unchanged. For example, if apersonplays in a golftournament for an opportunityto win aprize, he or she is withinthe actualcontestant exclusion to the definition of betting. If instead the person does not play in that tournament but wagers on the performance ofan actual contestant, he or she is gambling under Texas law. To read the actual-contestant exception as some suggest would have that exception swallowthe rule.36 B. Season-Long Fantasy Sports The same framework applies to traditional fantasy sports leagues, but the outcome may differ depending on whether the house takes a rake. Payment ofa fee to participate in the league constitutes an agreement to win or lose something of value, and the outcome depends at least partially on chance, thus involving a bet. However, traditional fantasy sports leagues often differ from dailyfantasy sports leagues inthatanyparticipationfee is notretainedbythe "commissioner" ofthe traditional fantasy sports league and is instead paid out wholly to the participants. And section 47.02 contains a defense to prosecution when "(1) the actor engaged in gambling in a private place; (2) no person received any economic benefit other than personal winnings; and (3) except for the advantage ofskill or luck, the risks oflosing and the chances ofwinning were the same for all participants."37 Thus, to the extentplay in atraditional fantasy sports league satisfies the above three elements, the participants in such league may .avail themselves ofthe defense to prosecution.

34See Ross v. St. Luke's Episcopal Hosp., 462 S.W.3d 496, 504 (Tex. 2015) (applying doctrine ofejusdem generis to hold that the a broadterm in a list was constrained by the meaning ofthe remaining, narrower terms). 35See Ill. Att'y Gen. Op. No. 15-006 (Dec. 23, 2015) at 10-13 (Letter from Honorable Lisa Madigan, Ill. Att'y Gen. to Honorable Elgie R. Sims, Jr. Ill. State Rep., Dist. 34, and Honorable ScottR. Drury, Ill. State Rep., Dist. 58). 36See Long v. Castle Tex. Prod Ltd P 'ship, 426 S.W.3d 73, 81 (Tex. 2014) ("[C]ourts are to avoid interpreting a statute in such a way that renders provisions meaningless." (quotation marks omitted) (alteration in original)). One paid daily fantasy sports operator also contends thatthe payment ofentry fees to participate in fantasy leagues are notbets. See ZwillGen Briefat4. TheNew York courtrejected this argument, holdingthatthe entry fees were "somethingofvalue" underNewYork law and thus constituted abet. New Yorkv. DraftKings, Inc., No. 453054- 2015, at 7 (N.Y. Sup. Ct. Dec. 11, 2015), New York v. FanDuel Inc., No. 453056-2015, at 7 (N.Y. Sup. Ct. Dec. 11, 2015). We agree with the New York court that the labelling ofthe consideration as an entry fee does not transform its character as consideration for the opportunity to win a prize. 37TEX. PENAL CODE§ 47.02(b); see Tex. Att'y Gen. Op. No. GA-0611 (2008) at 5 (acknowledging that the term "and" is usually used in a conjunctive sense).The Honorable Myra Crownover

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In present form, which has remained unchanged for purposes ofthis analysis since its codification in 1973,38 the Legislature has seen fit to prohibit betting on the performance of individuals in games or contests but to not prohibit actual contestants in contests of skill from receiving compensation or prizes. 39 Under this statutory framework, odds are favorable that a court would conclude that participation in paid daily fantasy sports leagues constitutes illegal gambling, but that participation in traditional fantasy sport leagues that occurs in a private place where no person receives any economic benefit other than personal winnings and the risks of winning or losing are the same for all participants does not involve illegal gambling. It is within the province ofthe Legislature, and not this office or the courts, to weigh the competing policy concerns necessary to alter this framework to legalize paid daily sports fantasy leagues.

38See Act ofMay 24, 1973, 63d Leg., R.S., ch. 399, Sec. 1, §47.01-.02, 1973 Tex. Gen. Laws 883, 965--66. 39TEX. PENAL CODE§§ 47.0l(l)(B), .02(a)(l).The Honorable Myra Crownover

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### SUMMARY Under section 47.02 ofthe Penal Code, aperson commits an offense ifhe or she makes a bet on the partial or final result ofa game orcontest or onthe performance ofa participant in a game or contest. Because the outcome of games in daily fantasy sports leagues depends partially on chance, an individual's payment ofa fee to participate in such activities is a bet. Accordingly, a court would likely determine that participation in daily fantasy sports leagues is illegal gambling 'under section 47.02 ofthe Penal Code. Thoughparticipating in a traditional fantasy sports league is also illegal gambling under section 47.02, participants in such leagues may avail themselves ofa statutory defense to prosecution under section 47.02(b) ofthe Penal Code when play is in a private place, no person receives any economic benefit other than personal winnings, and the risks ofwinning or losing are the same for all participants.

CHARLES E. ROY First Assistant Attorney General BRANTLEY STARR Deputy Attorney General for Legal Counsel VIRGINIA K. HOELSCHER Chair, Opinion Committee CHARLOTTE M. HARPER Very truly yours, 

# ;c._**?"'-"C~-** KEN PAXTON Attorney General ofTexas

Assistant Attorney General, Opinion Committee