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Bill to exclude fantasy sports from gambling law draws derision

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State lawmakers are moving to spell out that the “fantasy sports” leagues being advertised heavily on TV — and the wagering around them — is legal in Arizona, even as prosecutors in some other states are trying to close them down.

Current Arizona law makes it to illegal to spend money to participate in any game or contest of chance of skill. That includes betting on the outcome of a future event.

SB1515 would specifically exclude “fantasy sports league competitions.”

But Kelsey Lundy, who lobbies for the Fantasy Sports Trade Association, insisted that the legislation her group is pushing does not, in fact, legalize anything. Instead, she told members of the Senate Judiciary Committee on Thursday this simply seeks to clarify the law.

That, however, is not the conclusion of Attorney General Mark Brnovich.

In a letter to the chief executive of DraftKings, one of the fantasy league firms, Brnovich noted the company is soliciting players nationwide. But in the letter, obtained by Capitol Media Services, Brnovich told Jason Robins that DraftKings is apparently failing to warn Arizonans that they would be breaking the law by participating and collecting any winnings.

Fantasy sports is a kind of online game where players choose “virtual teams” of real players in a professional sport. Based on each of those player’s performances in actual games, the team accumulates points.

Players win and lose money depending on the performance of their teams.

What at one time started as seasonal wagers have now exploded into daily games and payouts.

Lundy said Arizonans have been participating in online fantasy leagues since the early 1990s.

The problem, she said, is state law spells out exceptions from its ban on gambling, ranging from bingo nights at churches to the games of skill at places like Dave and Buster’s.

“But the law is silent on fantasy sports in Arizona which has created this legal gray zone that my client would like to clarify,” Lundy said.

That contention that fantasy sports always has been legal is crucial to what happens even if the measure is approved by the Legislature and signed by the governor.

Recent publications on bestuscasinos.org explain that, in 2002 the state signed a deal giving Indian tribes the exclusive right to operate certain kinds of gambling. That compact includes limits on types of gaming, the number of casinos and the number of machines.

More significant, that deal says if the state expands the kinds of gaming allowed off reservation it triggers a “poison pill” in that compact that eliminates any limits on what the tribes can do. And that also would absolve the tribes of any further obligation to share profits with the state.

For the most recent budget year, that figure exceeds $88.4 million.

Gaming interests crafted the legislation to have a specific legislative finding that the competitions have been in Arizona since the 1990s, “providing business and fan opportunities.”

“The Legislature has never considered fantasy sports league competitions to be a form of gambling,” reads the language approved by the committee.

But Valerie Spicer, executive director of the Indian Gaming Association of Arizona, said her members believe the law would trigger the “poison pill,” even with the legislative disclaimer.

Proponents said they don’t need to resolve that: The legislation contains language saying the law goes away if a court ultimately determines that it does, in fact, expand gaming in Arizona.

But Spicer said by that point, it will be too late. She said simply approving the law — even if can be voided later — triggers the provision.

And she derided the premise of the measure and its wording.

“Simply stating that it is not gambling doesn’t mean that it’s not gambling,” Spicer said, pointing out actions taking place across the nation by attorneys general in other states to review the issue, a review she said is likely to end the daily fantasy sports operations.

That’s the conclusion that Brnovich already has reached.

“Participation in your games for monetary winnings violates Arizona law,” he wrote to Robins.

And even if Arizona cannot shut down DrafKings, Brnovich warned Robins his firm could be in violation of the state’s Consumer Fraud Act for failing to warn Arizona consumers “that they are ineligible to play for monetary winnings.”

The 5-2 vote occurred over the objections of Cathi Herrod, president of the Center for Arizona Policy, who said her organization is opposed to any kind of legal gaming in the state.

Herrod said she understands that some people enjoy these fantasy leagues.

“That is not the issue before you today,” she told lawmakers. She said the issue is that “gambling harms families.”

And Herrod said it’s irrelevant that winning does require some skill, versus a lottery which is simply a game of chance. She said it is being advertised to would-be players as a quick way to get rich, with daily games versus a payoff at the end of the season.

“It does involve luring people in to bet on big payouts,” Herrod said. “People lose money while other people are making money off of some losing their money.”

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