Fantasy sports are a huge deal in the United States. It’s so popular that fantasy sports were the only form of gambling excluded from a 2006 law that made illegal nearly every other type of online gambling in the United States.
There are, however, some states whose residents are exempt from participating in national online fantasy sports games — Arizona is one of them. Which raises the question: Are fantasy sports illegal in the state of Arizona?
Fantasy Sports Overview
Since it hit the scene, fantasy sports have exploded in popularity. According to the most recent statistics, Americans spend over $1 billion a year on a game where we get to play a GM overlord. And the leagues love it, as it creates fantastic marketing and exposure opportunities for teams.
Fantasy sports were backed so fiercely by the various professional sports leagues that they lobbied aggressively to keep fantasy sports off the list of actionable items in the 2006 Unlawful Internet Gambling Enforcement Act of 2006.
Today, some of the largest media outlets sponsor and run their own Fantasy Sports Leagues – like CBS and ESPN. But many include the caveat: Residents of AZ, IA,LA,MD,MT,ND,TN,VT,WA can purchase and participate, but cannot win any of the prizes. So the question is: why is that? And does it mean that all fantasy sports activity in Arizona is illegal?
Arizona Gambling Laws
Section 13-3302 of the Arizona Revised Statutes outlines the state’s legal stance on Gambling. Suffice it to say, the laws are confusing and nuanced; which may be one of the reasons AZ is excluded from certain large-scale fantasy sports games, as the statue can be argued in various ways. In other words, better to be safe than sorry in the eyes of nation-wide leagues.
There are several different classifications of gambling in Arizona: regulated gambling, amusement gambling, and social gambling. Regulated gambling primarily refers to establishments that are protected under the Indian Gaming Regulatory Act of 1988. Amusement gambling and social gambling, however, are not as straightforward.
Arizona statues consider the following three points when deciphering between legal and illegal gambling. The law of the land considers something to be of a gambling nature if:
1) The act of risking or giving something of value is present; if no money or value item is required to participate, then it’s not gambling;
2) The event in question incorporates and opportunity to obtain a benefit; and
3) If a game or contest, of chance or skill, or a future contingent event is central to the event, it’s gambling.
Now, not ALL gambling is illegal in Arizona. There are certain activities which fall into “legal gambling” categories. The statutory exemptions (i.e., legal circumstances) 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
6) Social gambling
Essentially, what Arizona gambling laws try to do is protect people from being “tricked” or “lured” into parting with their money. You could almost think of it like, “Hey, if you want to have a weekly poker game with your friends, fine; but we’re on the lookout for people trying to profit off of other’s gambling urges.”
The following parameters define “amusement gambling” in Arizona. Amusement gambling is permitted.
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.
If you wanted to wrap up the parameters in a blanket statement, it’s fair to say that in AZ, if a “game” or “contest” is based largely on skill – not chance – there is a good chance it is likely legal. Basically, if a non-participant in the event in question receives a profit, or even a chance of profit, from the money paid to participate in the game, the activity is not amusement gambling.
“Social gambling” is very similar to “amusement gambling.” The distinction between the two boils down to the scale of the event. Social gambling, in general, refers to private gambling (i.e., weekly poker game, etc.)
The four golden rules of social gambling are:
1) No other player receives any benefit other than winnings
2) No non-player receives any benefit from the games
3) None of the players are younger than21
4) All of the players compete on equal terms with each other
Moreover, and perhaps obviously, it’s legal for people to operate a card game if the players are not required to wager anything of value for an opportunity to profit. For example, you can’t charge for a chair at the event.
Online Fantasy Sports Legalities In Arizona
So, this brings up to the question of whether or not fantasy sports are legal in Arizona. And the answer is, “they are and they aren’t.” It actually all depends on the venue in which the game was originated, and the way it’s carried out.
Situation One: No Money
If your fantasy sports league does not play for money or anything of significant value, it’s legal.
Situation Two: Of-Age Participants Only
Everyone in the league is over the age of 21, and no entity, outside of the contest, will benefit financially. But the winner can claim a prize.
Situation Three: Find A Legal Entity To Run The League Out Of
The fantasy league is conducted out of a regulated gambling establishment (i.e., Tribal Compact Casino).
The reason, however, why AZ residents cannot participate financially in nation-wide fantasy sports leagues is due to the “no other person, other than the player or players, derives a profit from the money paid to gamble” clause in the statues. After all, ESPN and CBS are undoubtedly taking a processing/administrative fee, thereby disqualifying the activity as an “amusement” or “social” gambling event in the letter of Arizona law.