Facts

Plaintiffs operate race tracks, including Santa Anita Race Track and Golden Gate Fields in California; Gulfstream Park in Florida, Pimlico Race Course and Laurel Park in Maryland; and Portland Meadows in Oregon. Defendant has operated a website called Derby Wars since 2011. Derby Wars offers fantasy horse racing contests, where the players pay an entry fee, and then select horses in a series of live horse races run at racetracks across the country, including plaintiffs' tracks. The player who selects the horses that pay off the most money, based upon the actual betting payoffs at the racetrack where the horses run, wins the cash prize.

PLAINTIFFS' CONTENTIONS: Plaintiffs argued that defendant has never been licensed by any state to accept wagers on horse races, nor has defendant ever obtained the consent of plaintiffs to include races run at any of plaintiffs' racetracks in the Derby Wars contests.
Plaintiffs contended that defendant's contests constitute off-track wagering on horseracing, such that defendant is required to comply with the Interstate Horseracing Act, which requires defendant to be licensed to accept wagers, to obtain the consent of plaintiffs to include plaintiffs' races in the Derby Wars Contests, and to pay plaintiffs, the state, and horsemen's groups, a portion of the wagers accepted by Derby Wars.

DEFENDANT'S CONTENTIONS: Defendant contended that its contests are not gambling, but simply skill based fantasy sports, and therefore, not subject to the Interstate Horseracing Act. Defendant argued that it does not need the consent of plaintiffs to use plaintiffs' races in its contests, nor is defendant required to make any payments to plaintiffs.

Damages

Plaintiffs asserted that they were denied the fees payable to race tracks for off-track wagers accepted on races run at its tracks.

Result

On May 15, 2017, the court granted plaintiffs' motion for partial summary judgment, and denied defendant's motion for summary judgment, finding that defendant's contests were in fact off-track wagering on horseracing, subject to the Interstate Horseracing Act, and that defendant is operating an off-track betting system, such that defendant needed the consent of plaintiffs to include plaintiffs' races in its contests, and that defendant was required to make payments to plaintiffs for its contest entry fees. On June 13, 2017, the court entered a Stipulated Judgment that defendant's contest entry fees are bets or wagers under applicable law and that defendant is operating an off-track betting system. The court also found that defendant is to pay to plaintiffs $1,000,000, subject to discount for earlier payment, and that defendant is permanently enjoined from using plaintiffs' races in its contests.

Other Information

According to plaintiffs, this is the first American case to hold that entry fees in daily fantasy contests are wagers, and therefore gambling, which will be an important precedent for fantasy sports going forward. Mediation on March 21, 2017, before Judge Nancy Wieben Stock, ret., of JAMS was unsuccessful.