Dew-Becker v. Wu: Daily Fantasy Sports as Gambling

Dew-Becker v. Wu: Daily Fantasy Sports as Gambling

Fantasy sports contests, enjoyed by millions of Americans, are probably not the first thing people think of as “gambling,” which is tightly regulated in most United States jurisdictions. Indeed, while state regulation of gambling is widespread, “fantasy sports are legal in most states.” However, new daily fantasy sports (DFS) platforms have muddied fantasy sports’ legal standing. While DFS is now legal in forty-three states, including Illinois, some have argued DFS is gambling (including, as detailed below, former Illinois Attorney General Lisa Madigan). Here, I disagree with Dew-Becker v. Wu, an Illinois Supreme Court case finding that DFS contests are not gambling.

Traditional fantasy sports take place in “leagues” in which players create “teams” of real-life athletes. The number of teams in a league can vary. For instance, in fantasy football, a typical league contains ten teams, but leagues of twelve to fourteen teams also exist. These “teams” compete against each other for money weekly and are scored by athletes’ performances. A 2007 survey revealed 34.5 million North Americans have played fantasy sports, and, around the same time, the industry’s economic impact was near $1.7 billion (roughly $2.2 billion in the present day, when adjusted for inflation). The industry grew even more with the introduction of DFS contests. These contests differ from traditional play in a couple aspects: they last up to three days rather than a full season and involve individuals pitted against one another randomly rather than against a set group of players in a season-long league. American DFS contests generated nearly $3 billion in revenue in 2019 alone. This growth of DFS has led to a debate over whether DFS is gambling and should be regulated as such.

States regulate gambling under their police power, which gives states the authority to protect citizens’ safety, morality, and health. Gambling has been perceived as engendering financial desperation and crime, particularly among vulnerable populations, and as impairing public morality. In most states, “gambling” is defined as 1) betting of consideration to 2) play a game of chance to 3) win a prize. The key question is usually whether a game is of skill or chance. Courts have devised tests to determine if an activity is based on chance or skill. Wu names three: 1) the predominant factor test, which asks if skill or chance “predominantly” determines the outcome; 2) the material element test, which asks if the outcome “depends in a material degree upon an element of chance,” and 3) the any chance test, which holds that an activity is gambling if chance is involved at all.

 In Wu, Dew-Becker lost $100 to Wu in DFS. Dew-Becker sued under an Illinois statute permitting a gambling loser to recover his wager from the winner. The Supreme Court of Illinois addressed whether DFS is “gambling” that would permit recovery under this statute.

The court noted that Illinois law defines gambling as “play[ing] a game of chance or skill for money or other thing of value,” but excepts from liability “actual contestants in any bona fide contest for the determination of skill.” To determine whether DFS fell within the “bona fide contest of skill” exception, the court applied the predominant factor test. Citing a host of peer-reviewed studies showing that DFS is mathematically determined more by skill than chance, the court concluded DFS was not gambling.

Justice Lloyd Karmeier dissented, arguing the court misapplied the predominant factor test. According to Justice Karmeier, courts that apply the test commonly conceive of predominance qualitatively (not quantitatively, as the majority did). In other words, Justice Karmeier would have asked “what [element] truly controls the outcome of the activity:” skill or chance?

There are several flaws in the majority’s interpretation of the statute. First, the court’s conclusion that DFS is a game of skill, even if taken at face value, cannot support its holding because the pertinent statute defines gambling as including games “of chance or skill.” (emphasis added). True, the statute exempts “actual contestants in any bona fide contest for the determination of skill,” but under the court’s approach, this exception swallows the rule. The court does not distinguish bona fide contests of skill from games of skill generally, or “actual contestants” from other contestants, meaning that every “game of skill” covered by the prohibition would also be covered by the “bona fide contest” exception (as detailed below, former Illinois Attorney General Lisa Madigan’s opinion offers a persuasive account of this exception). The court’s analysis, therefore, renders the statute’s prohibition on games of skill void and violates the principle that statutes “should be construed so that effect is given to all [their] provisions.”

Second, the court erred in its definition of a game of skill by focusing on the quantitative aspects of DFS rather than the qualitative aspects. Former Illinois Attorney General Lisa Madigan argued that “actual contestants” refers to individuals who actually participate in a contest, rather than wager on it. Based on this definition, Madigan concluded that DFS participants are more akin to wagerers than actual contestants and therefore do not fall within the exception. The Wu court attempted to explain away Madigan’s opinion by arguing she lacked “the benefit of the more recent research” showing that skill mathematically predominates in DFS. But these studies do not respond to Magidan’s argument and probably would not have changed her opinion. Madigan, like Justice Karmeier in dissent, focused not on the mathematical relationship between skill and chance in DFS, but on what factor (skill or chance) actually “determine[s] the outcome.” DFS is gambling under this qualitative approach because participants essentially wager on athletic performances outside of their direct control. While there may be some skill involved in predicting which athletes will do well, this predictive skill does not control the outcome of a DFS contest; the athletes themselves do.

The court also attempted to undermine the authority supporting Madigan’s opinion, but here too its arguments fall short. The court noted that Madigan’s opinion “relied heavily” on a Texas Attorney General opinion and that Texas uses the “any chance” test, implying Madigan’s opinion is not applicable under the predominant factor test. But the portion of the Texas opinion Madigan cited had nothing to do with judicially created tests. Madigan referred to the Texas opinion because, when it was written, Texas’s gambling statute mirrored Illinois’s as both contained the “bona fide contest” exception, and the Texas Attorney General interpreted that exception the same way Madigan herself did. The court does not explain how the interpretation of the Texas statute would have differed in a predominant factor test jurisdiction. Furthermore, Madigan’s position is supported by additional statutory language. As Justice Karmeier notes, Illinois law specifically prohibited wagering on the results of sports games at the time Wu was decided. This activity is indistinguishable from DFS: both involve participants betting money on the results of sports games, events over which they have no direct control.

Lastly, the court’s mathematical-predominance approach should not be used because it produces illogical results. As Justice Karmeier notes, poker would not be gambling under the court’s approach because studies show that skill predominates in that game. This result is absurd because poker is gambling; indeed, “[p]oker is sometimes treated as a synonym” for gambling. Justice Karmeier’s qualitative approach makes a good deal more sense, and courts have used it frequently (see here, here, and here).

However, Justice Karmeier’s qualitative approach is not free of flaws. Justice Karmeier argues that the “critical distinction” between gambling and a game of skill is a “participant’s ability to overcome chance with superior skill.” This test may redefine activities that are better understood as gambling as games of skill. Consider, for instance, a tennis match in which the winner of a coin toss receives a one-set advantage. The loser of the coin toss could overcome her bad luck with superior skill, but chance has given the other player a possibly insurmountable advantage. Activities such as these, in which players do not have the “same instrumentality for victory,” are better understood as gambling. Similarly, top DFS players use computer scripts that produce thousands of optimal team lineups. Normal players, who do not know these tools and have the misfortune of being matched against a “high roller” who does, will most often lose.

Moreover, even if a game could theoretically be mastered with skill, it should be considered gambling if a typical player would be unlikely or unable to master it in practice. In Ruben v. Keuper, the court determined that a boardwalk game in which participants attempted to roll a ball into a hole, though it could technically be mastered, was in practice a casual game of chance played by passersby who did not actually attempt to master it. Similarly, most DFS participants are casual players who lack the computer scripts and statistical knowledge necessary to achieve mastery. As most of us know from experience, the vast majority of participants in boardwalk and carnival games lose. Similarly, about ninety percent of DFS participants lose money, indicating that a typical player cannot or will not develop the skills needed to win consistently.

Finally, DFS produces social ills traditionally associated with gambling, which the court should also consider. DFS platforms reel in participants with advertisements giving a false impression that average players can win big. These ads may trick the gullible or desperate into financial loss, a policy outcome that anti-gambling legislation seeks to avoid. Additionally, DFS “increase[s] the likelihood of the development of pathological gambling problems.” Regulating DFS as gambling would thus further policies justifying restrictions on gambling generally.

While DFS has now been widely legalized (including in Illinois, as mentioned above), legal developments in other states indicate the issues in Wu are far from moot. For instance, in White v. Cuomo, the court ruled that New York’s legislature could not legalize “interactive fantasy sports” in the state because the state’s constitution prohibits gambling. Other states have similar constitutional provisions that bar gambling. Thus, if DFS is gambling, states that have legalized DFS may have acted illegally if they did not act pursuant to a constitutional amendment. Deciding whether DFS is gambling thus goes directly to the heart of state legislatures’ constitutional authority in many cases. Weighty questions such as these deserve a stronger analysis than they received in Wu.

Rex Alley is a J.D. candidate (’22) at Northwestern University Pritzker School of Law and an Executive Editor of Volume 116 of the Northwestern University Law Review. He graduated from the University of Southern California in 2019.

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