Source: https://www.oconnors.com/blog/2017/05/31/the-illegality-of-online-fantasy-sports-and-texas-hold-em-in-texas/
Timestamp: 2017-10-23 16:50:23
Document Index: 192544510

Matched Legal Cases: ['§47', '§47', '§47', '§47', '§47', '§47', '§47']

The (Il)legality of Online Gambling in Texas | Annotations
Posted on May 31, 2017 by Staff Reporter
The (Il)legality of Online Fantasy Sports and Texas Hold ’Em in Texas
In January 2016, Texas Attorney General Ken Paxton issued an opinion stating that participating in paid daily fantasy sports leagues (fantasy sports) most likely constitutes illegal gambling in Texas.[1] In response, the Texas House Committee on Licensing and Administrative Procedures (Texas House Committee) approved a bill that would legalize fantasy sports.[2] Some would argue that this bill would not make fantasy sports legal but simply clarify that it never was illegal—fantasy sports is predominantly a game of skill, not chance, and therefore not gambling.[3] This argument, however, misunderstands how the Texas Penal Code defines gambling.
An activity can constitute illegal gambling even if skill predominates over chance.[4] Under Texas Penal Code §47.02(1), it is a crime to make “a bet … on the performance of a participant in a game or contest.” Clearly, playing fantasy sports involves the performance of a participant (athlete) in a game or contest (sporting event). The crux of the question then becomes whether fantasy sports players “bet.”[5] A “bet” is “an agreement to win or lose something of value solely or partially by chance” (emphasis added).[6] Players in fantasy sports win or lose money, which is clearly something of value. It is equally clear that winning or losing is determined partially by chance—an athlete’s performance, which is what fantasy sports players are ultimately “betting” on, can be materially affected by factors outside of the fantasy sports participant’s control.[7] Since playing fantasy sports clearly involves an element of chance, it constitutes illegal gambling.[8] While it is fair enough to claim that skill predominates in fantasy sports, it would be disingenuous to say that playing fantasy sports does not involve a significant amount of chance—top players win more frequently than other players, but they do not always win.[9] While it may be hard for fantasy sports enthusiasts to admit, these definitions make it clear that playing fantasy sports constitutes illegal gambling in Texas.
The issues presented by the legal status of fantasy sports have a strong thematic link with another Texas pastime—Texas Hold ’em poker. Poker enthusiasts, much like fantasy sports players, have long argued that poker is predominately a game of skill, not chance, and therefore not gambling.[10] Unfortunately, just like with fantasy sports, this argument lacks legal merit, at least under current Texas law. It is illegal to play “for money … at any game played with cards,” and poker is quintessentially a game played for money with cards.[11] The Texas Attorney General’s office has stated that it is “irrelevant … whether poker is predominantly a game of chance or skill.”[12] In fact, Paxton’s opinion about fantasy sports analogized the legality of poker to that of fantasy sports.[13]
Gambling Defenses Do Not Apply
Under Texas Penal Code §47.02(b), there is an absolute defense to illegal gambling that, arguably, would bar prosecution for playing fantasy sports or poker. While §47.02(b) may apply to small, local fantasy sports or poker games, it almost certainly does not apply to playing online.
It is an absolute defense to prosecution for illegal gambling if “(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 of skill or luck, the risks of losing and the chances of winning were the same for all participants.”[14] If one is playing fantasy sports or poker online, element (3) may very well be satisfied. However, elements (1) and (2) would not.
Element (1) would not be satisfied because fantasy sports and poker websites are typically not private places.[15] Element (2) would not be satisfied because those websites do make money other than personal winnings. The websites do not participate directly, and the participants pay them a fee—fantasy sports participants pay entry fees, and poker players pay either an entry fee for tournaments or a “rake”[16] for cash games. Therefore, the defense to illegal gambling does not apply to online fantasy sports or poker.
While online fantasy sports and poker do appear illegal under Texas law, there is a strong argument that if skill predominate over chance, a game should not be considered illegal gambling—at least one jurisdiction has adopted this “predominance test.”[17]
The argument is basically that defining illegal gambling as any game determined partially by chance is overbroad.[18] Taken to the extreme, even a game like chess, which is widely considered to be a game of pure skill, is partially determined by chance. For example, the night before a match, a chess player could have had his sleep disturbed by something entirely out of his control, and his exhaustion could cause his performance to suffer. However, Texas courts have not adopted the predominance test.[19]
Given the current state of Texas law, it is a good bet that participating in online fantasy sports or poker is criminal. While both games are predominantly games of skill, it seems unlikely that Texas courts would hold that the predominance of skill makes a game not gambling under the Texas Penal Code. Therefore, if Texans want fantasy sports participants to be free from the threat of prosecution, the Texas House Committee’s bill to declare online fantasy sports legal is necessary. Alternatively, the Legislature could adopt some version of the “predominance test” to ensure that a wider array of Texas pastimes, like the aptly named Texas Hold ’em, would no longer expose their participants to the threat of criminal prosecution.
For more in-depth discussions of various Texas criminal laws, see O’Connor’s Texas Crimes & Consequences and O’Connor’s Texas Criminal Codes Plus.
[1] Tex. Atty. Gen. Op. No. KP-0057, 3-6 (2016) (referred to as Paxton Op.).
[2] H.B. 1457, 85th Leg., R.S.; Alex Samuels, Texas Lawmakers Consider Declaring Fantasy Sports Legal, The Texas Tribune, Apr. 3, 2017.
[3] See Samuels, Texas Lawmakers Consider Declaring Fantasy Sports Legal; Paxton Op. at 6-7.
[4] See Tex. Pen. Code §§47.01(1), 47.02; Paxton Op. at 4.
[5] See Paxton Op. at 4.
[6] Tex. Pen. Code §47.01(1).
[7] See Paxton Op. at 4-5.
[9] See Fantasy Sports Trade Association, Why Fantasy Sports Is Not Gambling; Understanding A Game of Skill.
[10] See Internet Texas Holdem, Is Poker Gambling or Skill?, Apr. 9, 2017; Kevin King, Why Poker Is Not Gambling, BestOnline Gambling, May 25, 2014.
[11] See Tex. Pen. Code §47.02(a)(3).
[12] Tex. Atty. Gen. Op. No. GA-0335, 3-4 (2005).
[13] Paxton Op. at 4.
[14] Tex. Pen. Code §47.02(b).
[15] An activity is not necessarily public just because it takes place on the Internet. For example, a private, password-protected server not open to the general public could be considered a private place. However, the vast majority of fantasy sports and poker websites are open to the public and therefore not private places.
[16] Poker Zone, Poker Dictionary: Rake.
[17] See Chuck Humphrey, Poker as a Game of Skill: Recent Cases, ABA Business Law Section, Gaming Law Gazette (Spring 2009).
[19] See Odle v. State, 139 S.W.2d 595, 597 (Tex.Crim.App. 1940); State v. Gambling Device, 859 S.W.2d 519, 523 (Tex. App—Houston [1st Dist.] 1993, writ denied); Paxton Op. at 4.
Tagged 85th Legislature, Attorney General, Attorney General opinions, criminal law, fantasy sports, gambling, Ken Paxton, legislation, poker, proposed legislation, Texas, Texas Hold 'em, Texas Hold 'em poker, Texas laws, Texas Legislature, Texas Penal Code