California's Underdog Unable to Obstruct Decision on Daily Fantasy Sports Regulation
In a recent development, California Attorney General Rob Bonta has announced that daily fantasy sports (DFS) are illegal in the state, citing that these contests, including draft and pick'em-style games, fall under the category of sports betting and violate state law. According to Bonta, DFS games are considered betting on sporting events, making them illegal under California's Penal Code section 337a.
This ruling has sparked a legal battle involving Underdog Fantasy, Attorney General Rob Bonta, and the California Department of Justice. Underdog Fantasy, a popular DFS operator, has expressed its plans to continue offering services in California, arguing that DFS games involve skill, not just chance, and should not be classified as gambling. However, Bonta's opinion counters this by emphasizing that success in DFS depends on outcomes beyond the participants' control, similar to traditional sports wagering.
Underdog Fantasy sued both Bonta and the California Department of Justice on July 1, claiming that Bonta's opinion could create a legal cloud over DFS companies, potentially deterring businesses involved in the industry. The lawsuit also states that this could harm the entire DFS industry, which provides entertainment to millions of Californians.
Judge Jennifer Rockwell recently denied Underdog's request to prevent Bonta from issuing a legal opinion on the status of DFS in California. Rockwell ruled that Bonta's legal opinion does not effect any change in the law. However, she did reject the idea that a delayed filing by Underdog was reason enough for immediate emergency relief.
PrizePicks, a competitor of Underdog Fantasy, has already shifted its offerings to a peer-to-peer format in response to potential legal issues surrounding DFS in California. If Bonta's upcoming opinion labels all DFS contests as illegal in California, operators like Underdog may need to reconsider their business models.
Governor Gavin Newsom has expressed a desire for a collaborative approach to address the issue, indicating that a clearer path forward may be sought through dialogue and understanding. It remains unclear how or if Bonta will enforce this opinion, but the legal battle over DFS in California is sure to continue.
Underdog Fantasy, in its lawsuit against Attorney General Rob Bonta and the California Department of Justice, alleges that Bonta's opinion on the illegality of DFS could cause a detrimental impact on the fintech sector and, more specifically, the financially-inclined business sector involved in the DFS industry. If Bonta's upcoming opinion remains that all DFS contests are illegal in California, it may necessitate changes to the business models of operators like Underdog Fantasy, potentially altering the future landscape of the industry.
