California AG brands DFS “illegal”; Governor Newsom disagrees
California Attorney General Rob Bonta has announced that daily fantasy sports (DFS) betting should be made illegal in the state, similar to real money online casinos.
This news comes by way of a 33-page report curated by AG Bonta – who first began working on the document some 18 months ago.
While strictly a legal opinion and not yet Californian law, this revelation presents a new challenge for DFS operators currently serving the region, as Bonta’s guidance may be used to prosecute platforms that offer such contests on a county-by-county basis.
Why has the California AG made this decision?
In the extensive report, Bonta outlined that pick’em and draft-style DFS betting products are illegal, referencing the state’s 1909 legal code that prohibits wagers on “uncertain events”.
And, according to Bonta, DFS and traditional sports betting cannot be considered ‘skill-based’ as outcomes are always out of the bettor’s control.
Thus, the AG determined that any sports-related prediction or estimate that requires an entry fee (such as a bet) directly opposes California law.
Bonta likened DFS to normal sports betting – as individuals are tasked with correctly projecting the performance of a player by staking real money in exchange for potential profit.
In a statement, the AG said the following: “We conclude that participants in both types of daily fantasy sports games – pick’em and draft-style games – make ‘bets’ on sporting events in violation of section 337a.”
Reaction from DFS operators – turbulent period ahead?
Several DFS operators have publicly resisted Bonta’s report, with DraftKings explicitly stating its intention to extend its 13-year tenure in California.
Speaking to ESPN, DraftKings pointed to the potential for a collaborative solution to the issue: “We intend to work with stakeholders, including the office of the Attorney General, to try to find an amicable resolution.”
A FanDuel representative toed a similar line, saying: “We look forward to meeting with the Attorney General’s office to talk through our next steps.”
However, relations between the AG and other operators, such as Underdog, are not quite so cordial.
In June, Underdog attempted to block Bonta’s report from being released. A court ruled that the results of this DFS review solely represented “the opinions of the California Attorney General” and “do not carry the weight of law.”
Subsequently, Underdog’s appeal was thrown out – and the judge allowed Bonta to release this monumental piece.
Nevertheless, Underdog remains steadfast in its business approach within California. The group intends to continue to provide content in the area – with an estimated 10% of the firm’s total revenue derived from the Golden State.
Governor Newsom unhappy with AG DFS opinion
A spokesperson for Governor Gavin Newsom has voiced opposition to Bonta’s legal guidance: “The Attorney General, in his independent capacity, issued this opinion – not the Governor’s office.”
The statement concluded: “While the Governor does not agree with the outcome, he welcomes a constructive path forward in collaboration with all stakeholders.”
While the Governor stands against the views of his Attorney General, the California Nations Indian Gaming Association (CNIGA) supports Bonta’s report.
Chairman of the CNIGA, James May, touched on a lack of “accountability” for “illegally wagered” cash over the last decade.
With plans to deliver a tribal-owned sports betting operation in 2028, the CNIGA has a vested interest in the outcome of Bonta’s DFS review. The shuttering of DFS platforms in California would pave the way for a clear run at the market in 2028 for tribal groups.
May’s statement strongly alludes to the potential for prosecution, as it later reads: “It is now imperative that the state back up this legal opinion with strong enforcement and that lawbreakers be held to account.”
Impact on DFS industry following AG’s “illegal” verdict
Nothing will change in the short term – but operators could face further scrutiny and challenges down the line.
For example, the Attorney General’s decision may be used by district attorneys in California, should localities opt to penalize DFS operators. In this instance, FanDuel, DraftKings and Underdog would probably mount opposing litigation.
The more likely outcome will see lawmakers deliberate over Bonta’s 33-page report to decide whether or not his arguments hold water.
Further, Governor Newsom is expected to hold talks with the Attorney General to better understand his verdict.
New bills may be introduced, as lawmakers seek to align state law with the Attorney General’s stance on DFS and sports betting.
Alternatively, legislators may collaborate to develop a safe, regulated DFS and sports betting framework by amending California’s current legal structure.
The situation is quite uncertain, but one thing is for sure: this is just the beginning of a lengthy battle between Attorney General Bonta, Governor Newsom, statewide operations and tribal groups.
How other states influenced AG Bonta’s opinion
California’s Attorney General did not hide from the fact that other states heavily influenced his legal opinion.
A section of the report reads: “Regulators in Virginia, Arizona, Wyoming and Florida, for example, have all concluded that state laws regulating sports wagering apply to pick’em.”
Regulations in the aforementioned states led Bonta to ponder why California does not regard DFS activities as sports gambling, when other US regions do.
In the same way that several domestic laws framed Bonta’s view, any injunction from Californian authorities against DFS operators could spell trouble for platforms in other jurisdictions.
As the nation’s most populous territory and with significant cultural influence over the rest of the US, lawmakers elsewhere may follow in the footsteps of AG Bonta’s march against pick’em and draft-style games.
