Alia Beard Rau

The Republic | azcentral.com

Senate Bill 1515 would exclude fantasy sports from Arizona's definition of gambling

State tribal representatives say the bill violates the Indian gaming compacts

Tribal representatives say fantasy sports is gambling. Some lawmakers disagree

The Arizona Legislature will decide whether fantasy sports are games of skill or chance.

But depending on the answer, it could cost the state $100 million a year.

Arizona is among five states that define gambling more narrowly than federal law, and in a way that has been interpreted to make it illegal for state residents to participate in fantasy sports competitions. The contests have risen in popularity with extensive advertising campaigns from companies such as Draft Kings and FanDuel.

Sen. Adam Driggs, R-Phoenix, has added a strike-everything amendment to Senate Bill 1515 that would explicitly exclude fantasy sports league competitions from the state's definition of gambling. The bill passed the Senate Judiciary Committee on Thursday and now needs a vote of the full Senate before advancing to the House.

The bill defines fantasy sports league competition as activities that involve a fantasy team that: includes players from more than one team; provides prize details in advance; is based on participants' knowledge and skill; is won based on statistical results of more than one sporting event; and is not based on the performance of a single athlete in a single game.

Driggs said current state law has a gray area that prevents Arizona residents from participating in many popular online fantasy sports games. He said he doesn't believe such games are gambling.

"The constituency I've heard from in Arizona, they want to play fantasy sports," he said. "It allows friends and families to enjoy the games and follow their favorite players."

Future clouded for daily fantasy sports betting

But representatives of American Indian tribes say the bill will trigger the "poison pill" of the 2002 Indian gaming compact.

Under the compact, the state promises not to allow non-tribal entities to offer gaming in the state and the tribes in return provide some gaming revenue to the state and comply with restrictions on how and where to offer gambling. If a tribe believes the state is not honoring the compact, it can seek legal recourse that triggers a "poison pill," killing the compact and eliminating the regulations.

"This is a very concerning matter to us," said Arizona Indian Gaming Association Executive Director Valerie Spicer. "The invoking of the poison pill would risk nearly $100 million in funds to critical programs each year, programs such as education, wildlife conservation, tourism, emergency services and monies that go to local cities and towns."

Stacie Stern, general manager of the Scottsdale-based fantasy sports company Head to Head Sports, said the current law is unclear regarding fantasy sports in Arizona. The bill, she said, would provide clarity.

"We estimate close to 1 million Arizonans participate in these contests each year," she said. "Clarifying the legality of fantasy sports contests in Arizona is critical."

Stern argues fantasy sports do not constitute gambling because they involve skill, not just luck. They also don't depend on a single game or sporting event.

Fantasy football, for example, typically involves creating a fantasy team composed of players from a number of teams. The fantasy team's performance depends on the outcome of various games and the statistics of individual players.

"The goal is to allow fans to engage in a more meaningful way with the sports and athletes they love," she said. "This is not gambling or gaming, and I do not believe we should be defined as such."

Under threat, fantasy sports industry ramps up lobbying

Heidi Staudenmaier, an Arizona attorney representing the Fantasy Sports Trade Association, said she does not believe the legislation would trigger the poison pill.

"We have no desire to violate the compact," she said.

Just in case, Driggs included wording in the bill that would automatically undo the changes if a court or legal mediator determines the changes trigger the poison pill.

But Spicer said that's not good enough.

"You can't unring the bell," she said. "If a tribe decides to challenge that this is a poison-pill violation, the triggers are immediate and far-reaching. Then and there they can cease their payments to the state."

Cathi Herrod, executive director of the influential conservative advocacy group Center for Arizona Policy, is opposing the bill. But not for the reason the tribes are opposing it: Her organization opposes all gambling.

"Many of us enjoy fantasy sports leagues, but that is not the issue," she said. "The issue is whether wagering on fantasy sports constitutes gambling." She said she believes it does.

"Portraying these games as involving mostly skill has increased the risk of addiction," she said. "People lose money. Gambling hurts families."

Daily fantasy sports industry takes fight to states

Republican and Democratic members of the Senate Judiciary Committee said they had mixed feelings about supporting the bill. Although most said they don't believe fantasy sports games are gambling, they worried about a legal challenge from the tribes. Several said they will vote against the bill when it goes before the full Senate if Driggs can't reach a compromise that the tribes support.

"I don't think fantasy sports is gambling, and I don't think it should be," said Sen. Martin Quezada, D-Phoenix, who voted against the bill. "If we can find a way to make that fit in and not violate that compact, I'm all for that. But I'm not yet satisfied we are not going to violate it."

Driggs, who said he's been working on this legislation for two years, promised to keep working on the wording.

"I'm not trying to invoke the poison pill," he said. "It is my full intention to work with the tribes."