© 2013 The Texas Lawbook.
By Mark Curriden
(March 4) – Online fantasy sports operator DraftKings sued Texas Attorney General Ken Paxton in Dallas County District Court Friday evening, seeking a court order to prevent Paxton from “forcing DraftKings out of business in Texas.”
DraftKings lawsuit came only hours after Paxton announced the state had reached a settlement with the other major daily fantasy sports site, FanDuel.
Under the settlement agreement, FanDuel will stop accepting paid entries for cash prizes in the state on May 2.
“This agreement follows Attorney General Paxton’s January 19 opinion stating that paid online daily fantasy sports contests, like those FanDuel operates, are illegal under current Texas law,” Paxton said in a press release.
Lawyers representing DraftKings said Friday evening that Paxton is wrong about Texas law.
DraftKings sued to “prevent the Texas Attorney General from further acting to eliminate daily fantasy sports contests enjoyed by hundreds of thousands of Texans for the past decade,” the lawsuit states.
“That DFS games are contests of skill is now beyond credible dispute,” Gibson Dunn partner Rob Walters, a Dallas representing DraftKings, wrote in the lawsuit, which seeks a temporary restraining order against Paxton.
“To DraftKings’ knowledge, every statistical and economic expert who has studied DFS games has concluded that their outcomes turn on skill, not chance,” Walters wrote. “Indeed, one leading University of Chicago statistician put it more bluntly, calling chance ‘overwhelmingly immaterial’ to the outcome of DFS contests.”
Paxton’s office did not respond to an email or phone call seeking comment on the DraftKings lawsuit.
But Paxton’s press release praised “FanDuel for responsibly and pro-actively working with us to reach this settlement.
“This will spare both the company and the taxpayers of Texas the expense of an extensive lawsuit that I believe would only affirm what my office has already determined,” Paxton said.
Paxton said that, “unlike some other states, Texas law only requires ‘partial chance’ for something to be gambling; it does not require that chance predominate.”
The attorney general’s press release states, “traditional fantasy sports leagues that are not operated by a third party for revenue are, as a general rule, legal under Texas law. In those leagues, participants generally split any pot amongst themselves, so there is no house that takes a cut.”
FanDuel will continue to operate its free games in Texas, but will stop accepting paid contest entries on May 2. In return, the Office of the Attorney General agrees not to take any legal action against FanDuel in connection with the operation of its contests.
In its lawsuit, DraftKings argues that “all fantasy sports, including those offered by DraftKings, are contests of skill.
“The contestants in fantasy contests act as general managers of their fantasy teams, and in that role, they have to use their skill, knowledge of the sport and athletes—and master complex econometric and statistical concepts—to select their fantasy rosters of real- world athletes under a salary cap and other rules applicable to these fantasy sports,” the lawsuit states.
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