Are Online Fantasy Sports Illegal In Arizona?

are online fantasy sports illegal in ArizonaFantasy sports were the only form of gambling excluded from a 2006 law that illegalized nearly every other type of online gambling in the United States.

Some states, however, classify fantasy leagues as gambling. Which raises the question: Are online fantasy sports illegal in Arizona?

Real Sports Leagues Love Fantasy Sports Leagues

Fantasy sports have exploded in popularity. According to the recent statistics, Americans spend over $1 billion a year to play GM overlord. And the real leagues love the fantastic marketing and exposure opportunities it creates. In fact, professional sports leagues lobbied aggressively to keep fantasy sports off the list of actionable items in the 2006 Unlawful Internet Gambling Enforcement Act of 2006.

National Fantasy Leagues v. Arizona Gambling Laws

Today, some of the largest media outlets including CBS and ESPN — sponsor and run fantasy sports leagues. But the platforms include a caveat:  Residents of AZ, IA,LA,MD,MT,ND,TN,VT,WA can purchase and participate, but cannot win any of the prizes.  Why is that? Are online fantasy sports illegal in Arizona?

Section 13-3302 of the Arizona Revised Statutes outlines the state’s stance on gambling. In short, the laws are as clear as mud — which may be why AZ is excluded from certain large-scale fantasy sports leagues: the state’s regulations present too much of a hassle.

Arizona recognizes several gambling classifications: regulated gambling, amusement gambling, and social gambling. Regulated gambling primarily refers to establishments protected under the Indian Gaming Regulatory Act of 1988. Amusement gambling and social gambling aren’t as clear cut.

Arizona Judges consider three main points in gambling legality cases:

  1. Are players required to buy in?  If not, then it’s legal;
  2. Does the event involve a benefit opportunity? If so, there’s a good chance it may be considered illegal gambling;
  3. Is a future contingent event central to the event? If so, then it probably falls into the illegal gambling column.

Not ALL gambling is illegal in Arizona. Certain activities fall under the “legal gambling” umbrella. Statutory exemptions include:

  1. Gambling at state, county or district fairs that satisfy certain restrictions;
  2. Raffles conducted by qualifying non-profits;
  3. Official raffles conducted by state, county and local historical societies;
  4.  Regulated gambling;
  5. Amusement gambling; and
  6. Social gambling.

Amusement Gambling

Arizona gambling laws aim to protect residents from being “tricked” or “lured” into losing money. A weekly poker game with friends is fine, but once a predatory element is introduced, things become legally dicey.

The following parameters define allowable “amusement gambling” in Arizona:

  1. Player actively participates the game or contest or with a device.
  2. “Outcome is not in the control, to any material degree, of any person other than the player or the players.” (i.e., there can’t be a profiting puppet master in the background who has the power to determine the outcome).
  3. Prizes aren’t offered as “lure” to separate the player from their money.
  4. The gambling is an athletic event and no other person, other than the player or players, derives a profit from the money paid to gamble by the players.
  5. The gambling is an intellectual contest or event, the money paid to gamble is part of an established purchase price for product, no increment has been added to the price in connection with the gambling event and no drawing or lottery is held to determine the winner or winners.
  6. The game must be played for “entertainment” purposes.

Takeaway: If a game or contest is based largely on skill – not chance – there’s a good chance it’s likely legal in Arizona. Basically, if a non-participant receives a profit, or even a chance of profit, the activity can’t be considered amusement gambling.

Social Gambling

“Social gambling” is very similar to “amusement gambling.” The distinction boils down to scale. Social gambling, in general, refers to private gambling (i.e., weekly poker game, etc.)

The five golden rules of social gambling:

  1. No player receives any benefit other than winnings;
  2. No non-player receives any benefit from the games;
  3. Don’t charge for chairs;
  4. None of the players are younger than 21; and
  5. All of the players compete on equal terms with each other.

Are Online Fantasy Sports Illegal In Arizona? Depends on the situation.

So, this brings us back to the original question: are online fantasy sports legal in Arizona? The answer: yes and no. It all depends on the event execution.

Situation One: No Money

If your fantasy sports league doesn’t play for money or anything of significant value, it’s legal.

Situation Two: Of-Age Participants Only

If everyone in the league is over the age of 21, and no entity, outside of the contest, will benefit financially, the winner can claim a prize.

Situation Three: Find A Legal Entity To Run The Game

The fantasy league is conducted out of a regulated gambling establishment (i.e., Tribal Compact Casino).

The “no other person, other than the player or players, derives a profit from the money paid to gamble” clause is why AZ residents cannot financially participate in nation-wide fantasy sports leagues. After all, ESPN and CBS are taking an administrative fee, thereby disqualifying the activity as an “amusement” or “social” gambling event, according to Arizona law.

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