The suit sought to recover losses incurred by the residents of the states who participated in these sports games, according to Eric J. Sinrod, an attorney in San Francisco.
"The plaintiff claimed that the registration fees paid by fantasy sports leagues' participants are tantamount to wagers or bets, and he believed that he is entitled to recover these fees under state gambling loss-recovery statutes," said Sinrod, who is an intellectual property attorney with the firm of Duane Morris. "The defendants moved to dismiss the plaintiff's complaint, arguing that it does not state proper claims under governing law."
According to the judge's ruling, the fantasy sports leagues allow participants to manage "virtual teams" of professional players in a sport during a particular season and to compete against other participants. The performance of the players, and the teams, is based on the statistical averages of those players.
"Fantasy sports leagues have become very popular as a result of supporting services offered on Web sites like those operated by the defendants. Such sites provide real-time statistical updates and tracking, message boards and even expert analysis," said Sinrod.
Flat Screen TVs
The fantasy "team" with the best performance at the end of the season, is designated the winner. Prizes, like T-shirts, are given to participants whose team wins a league. Managers of best teams across leagues are given larger prizes, including flat-screen TVs.
In this context, the federal judge sided with the defendants and turned down the plaintiff's complaint. The plaintiff failed to identify any participants who lost money to the defendants. There is nobody in particular on whose behalf he can recover.
More importantly, the judge recognized that it would be absurd to conclude that the combination of an entry fee and a prize constitutes gambling. "Indeed, if that were the case, spelling bees, beauty contests, golf tournaments and the like also would have to be gambling. When an entry fee is paid unconditionally and the prize is for a certain amount and is guaranteed to be won by a participant, a contest does not morph into gambling under the law," said Sinrod.
In addition, the Unlawful Internet Gambling Enforcement Act of 2006 which broadly prohibits Internet gambling, establishes that fantasy sports leagues are not gambling operations, said Sinrod. "This is because all prizes are announced in advance and do not depend on the number of participants and the amount of fees paid by them, the winning outcomes reflect knowledge and skill of participants and are based on accumulated statistical results of the performance of individual athletes, and winning outcomes are not based on the score, point-spread or any performance of a single real-world individual or team," said Sinrod.
Sinrod said the plaintiff's lawsuit has helped the fantasy sports leagues by leading to a clean bill of health from a federal judge.
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