Daily Fantasy Sports: Will Mississippi Regulators Throw the Penalty Flag?

Attorney General regarding illegality of daily fantasy sports (“DFS”) within those states, the DFS industry is playing defense.  It is only a matter of time before other gaming jurisdictions provide guidance on the legality of DFS in such states.

While the Mississippi Gaming Commission (“MGC”) and the Mississippi Attorney General have not yet issued any formal rulings on DFS, MGC Executive Director Allen Godfrey has stated that Mississippi is looking at the issue of whether DFS is gaming or not and should be issuing guidance in the near future.  Mississippi statutory provisions and case law and other precedent may provide some clues on what those positions might be.

The Mississippi criminal statutes state that “[no] person shall encourage, promote or play at any game, play or amusement … for money or other valuable thing, or shall wager or bet, promote or encourage the wagering or betting of any money or other valuable things, upon any game, play, amusement, cockfight, Indian ball play or duel … or upon the result of any election, event or contingency whatever ….”

While the statutory prohibition is very specific as to certain banned activities, the language is also very broad in other respects, using terms such as “any game, play or amusement” and “upon the result of any election, event or contingency whatever”.

Additionally, another Mississippi statute presents its own difficulties for DFS.  The Mississippi code provides that “[c]ontracts, judgments, securities, conveyances made, given, granted, or executed, where the whole or any part of the consideration or foundation thereof shall be for money, or any valuable thing won, lost, or bet at any game or games, or on any horse-race, cock-fight, or at any other sport, amusement, or pastime, or on any wager whatever, or for the reimbursing or repaying any money knowingly lent or advanced for the purpose of such gaming or gambling, or to be wagered on any game, play, horse-race, cock-fight, or on any sport, amusement, pastime, or wager, shall be utterly void.”

Moreover, beyond the words of the statutes cited above, Mississippi case law may have some implications for DFS.  One of the arguments advanced by DFS advocates is that it is a game of skill, not of chance, and thus not prohibited under the law.  Let’s see what the Mississippi Supreme Court has said on that topic.

In a 1936 case, the Mississippi Supreme Court opined regarding whether a pinball machine was a “gambling device” within the meaning of a criminal statute.  The machines required payment for play and prizes were awarded for exceeding certain points during play.  One issue considered by the Court was skill vs. chance.  The Court found that the pinball machines were not “games of skill played wholly for amusement” but instead determined that the play of the game for a novice “was a pure game of chance” and even for an expert player “strongly tends to show the predominant element of chance”.

In a 2001 case, the Mississippi Supreme Court considered whether a device was a “slot machine” within the meaning of the Mississippi Gaming Control Act (“MGCA”).  The Court noted that, absent compliance with the MGCA, the criminal statute prohibited the possession of a gaming device if three factors were met, including whether “[t]he winning of some part or all of the potential reward is dependent in substantial part on an element of chance.”

In the fall of 2015, the Mississippi Attorney General opined with respect to a city sponsored scavenger hunt involving both entry fees to participate and prizes for the winners and whether this contest constituted gambling.  Citing the 1936 Mississippi Supreme Court case as authority for the proposition that a game would be illegal gambling if “there was a predominant element of chance”, the AG concluded that the scavenger hunt “would not constitute gambling due to the degree of skill required to engage in the activity”.  However, the AG also conceded that the “determination is ultimately a factual one to be made by the governing authorities [of the city].”

Even though both of the cases cited above analyzed machines or devices, the principles enunciated regarding skill vs. chance are instructive and insightful.  If a Mississippi court were to determine that DFS involves a predominant or perhaps even a substantial element of chance, it is highly likely that the court would find DFS to violate Mississippi law.

The MGC has long maintained the position that any gaming in Mississippi is illegal if it is not conducted in compliance with and in legal locations licensed under the MGCA.  For example, the MGC has declared all internet gaming in the state to violate state laws; all foreign gaming waivers issued by the MGC to its Mississippi licensees to conduct internet gaming in other jurisdictions have included the clear statement that “[i]nternet gaming is not legal in Mississippi.”

With these things in mind—that more and more states are taking the position that DFS is illegal, that statutory language calls into question DFS play, that Mississippi case law includes language that indicates a strong element of chance in a game is often a determining factor of illegality, and that the MGC has consistently taken the position that any form of gaming not conducted in accordance with the MGCA is illegal–it would not be surprising for the MGC or the Attorney General to declare DFS illegal in Mississippi.