The state of Texas reached an agreement today with daily fantasy sports (DFS) website FanDuel that will cease the company's operations there. Attorney General Ken Paxton announced the agreement Friday, though Texas residents can still play FanDuel's free contests.
Texas defines gambling as games of "partial chance," even if the chance to win on a bet is greater than one-in-two. In a formal opinion in January, Paxton stated that daily fantasy sports games are illegal under Texas' state laws on gambling.
Paxton praised FanDuel for its cooperation in the agreement. Texas has not come to such a settlement with DraftKings, another prominent daily fantasy sports website.
"I commend FanDuel for responsibly and pro-actively working with us to reach this settlement," Paxton said in a statement. "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."
New York was the first state to stop DFS websites from operating under its gambling laws, but FanDuel and DraftKings were granted a stay in January allowing them to operate in the state while the legal case plays out. FanDuel no longer accepts entries from New York residents, whereas DraftKings is taking full advantage of the State Supreme Court Appellate Division's stay.
At issue for New York, Texas and any other states fighting DFS websites' presence on the Internet is whether or not they can be considered illegal gambling. Unlike traditional fantasy sports games, FanDuel and DraftKings require a buy-in for a large number of contests, which are refreshed daily.
Traditional fantasy sports typically last over the course of a season, and websites that offer the games leave the decision of implementing a buy-in up to the league's participants. Those contests are also considered games of skill.
DFS websites advertise contests as having better than a 50 percent chance to win, though states like Texas have a low standard for what constitutes chance in the context of gambling. Per its agreement with Paxton, FanDuel has until May 2 to discontinue its paid operations in Texas.
In response to the agreement, FanDuel issued a letter to "Texas Fans" that said: "Texas legislature will be in session in 2017 and we will work to pass legislation that protects fantasy sports and consumers so that we can bring our paid contests back to Texans as soon as possible."
