In this Gambling Insider article, Marc Zwillinger breaks down the landscape and legality of daily fantasy sports (DFS) in California after the state’s attorney general declared both DFS and Pick’em games illegal. While every other court that’s considered whether the contests are chance vs skill has said that DFS is a contest between participants, California AG Rob Bonta issued the opinion that fantasy games are instead wagers on what’s happening on the field. Read the original article here.
ZwillGen Founder and Managing Member, Marc Zwillinger, speaks with Gambling Insider about the regulatory turbulence on the Californian DFS scene – and what this could mean for operators both in and outside the state.
To begin, can you give us an overview of the background behind (and legality of) daily fantasy sports (DFS) in California? What exactly are Attorney General Rob Bonta’s powers in implementing a potential ban on operators?
For a start, I would say it’s a little too soon to talk about eliminating any operators or practices from the state, but the AG has definitely issued an opinion that explains why, in that office’s view, both traditional DFS and what some people call DFS 2.0, and other people call Pick’em games, are illegal in California. The first thing Attorney General (AG) Rob Bonta correctly pointed out is that skill isn’t all that matters with regards to gambling laws in California. If someone places a bet on a sporting event, it’s not solely a question of whether it’s chance versus skill.
The next big question then becomes: what is DFS?
Every other court that’s considered the question, including the Illinois Supreme Court and the New York Supreme Court, has said DFS is a contest that doesn’t take place on the field but that takes place between a bunch of participants who are in a separate peer-to-peer contest, in which whatever is happening on the field is simply an input – but not the actual contest itself. In California, the AG has issued the opposite opinion, saying that fantasy games are really wagers on what is happening on the field. I think that’s probably an incorrect analysis of California law and not how California courts might see it. Nevertheless, the AG disagrees – and the only way to resolve that is usually via litigation. Either through the operators suing the AG for a declaratory judgement or through the AG bringing in enforcement action. That might be the next step if operators don’t leave the state, their choices are to either sue first or wait to get sued by the AG for a variety of different potential conflicts including; deceptive and unfair trade practices or violating the gambling laws.
The usual path in the past has been that some operators will sue the AG for a declaratory judgement, arguing that the games are actually legal in the state. The operators can also simply wait, and if the AG wants to kick them out of the state, then he would have to bring enforcement action against them seeking either a temporary restraining order or a preliminary injunction to get them to cease operations. Otherwise, they would continue to operate while the litigation is pending. And at this point we don’t know if anyone is going to initiate litigation, but we know that Underdog unsuccessfully sued prior to the issuance of the AG’s opinion to try to stop it from being issued. This makes Underdog a likely candidate to seek a declaratory judgement that their games are legal. It’s also worth pointing out is there are two different types of operators. There are the operators like Underdog and PrizePicks who have the Pick’em type games, and then there are the operators like FanDuel and DraftKings who run a more traditional daily fantasy that doesn’t have the Pick’em offerings, and the AG’s opinion dealt with them differently. This opinion creates the perception that Pick’em games are essentially more illegal – and easier to declare illegal – than the traditional DFS, which is a much closer question.
Recently, the proposed law has been swiftly moving through the state Senate – but Governor Gavin Newsom disagrees with the legislation. Where does all this leave DFS and sweepstakes operators hoping to remain in the state right now?
Definitely in an uncertain place; it’s a bit of a grey area. Operators can take the risk of staying in the state, but they’re going to have to be prepared to litigate to defend their legality. It’s an uncertain time and it depends on the risk tolerance of the operator whether they remain or not. The Governor’s views certainly will be very significant here, especially when it comes to legislation. However, as to whether the Governor is going to stop the AG from engaging in enforcement actions, that depends more on their relationship and political context.
Indeed, the Governor’s Office has stated that he prefers a collaborative the issue. How would you expect that collaboration to manifest between the Government and the operators – if it were to happen?
I would expect that there would be meetings with the AG’s office and there would be a discussion about which types of contests would still be allowed in the state that the AG wouldn’t enforce against, and which types would be prohibited. There would be a common understanding of where the line is, because currently the opinion that has been issued doesn’t really provide that. Indeed, the opinion contains ambiguous language that essentially states that “season-long DFS may be permissible because there’s more control.” But how do you define the type of “season-long” contest where the contestants have more control? Is five weeks long enough? Based on the vagueness of the opinion, there is a lot of room in there for discussion around the AG’s interpretation of things and what kinds of contests might still be permissible. That’s what I think the Governor’s reference to a collaborative approach might mean here.
Do you think some companies have been using the medium of DFS to intentionally skirt anti-gambling regulations, reaping the benefits of California’s massive untapped gambling market?
Traditional fantasy is on solid ground in almost all states, even California
The offering of Pick’em style contests pushed the boundaries of fantasy into what looks closer to sports betting, to tap into an unserved market in certain states. Overall, I think it’s important to reiterate that there is a material difference between Pick’em style DFS and traditional DFS.
On the flipside, some in opposition of the bill have indicated suspicions of tribal lobbying in relation to AB 831 – what are your two cents on this?
I think it’s self-evident that the tribes are having a significant influence to try to preserve their monopoly in gaming in California, and they view all of this as cutting into the monopoly. To me, again, the difference between DFS and Pick’em style games is key, because for years the tribes didn’t have any serious misgivings about DFS. They understood that that was a separate type of contest. People who play DFS aren’t the ones most likely to gamble in a casino; they’re doing statistical analysis, it’s math.
Pick’em style games come closer to threatening the tribal casino’s interest. On the sweepstakes side of things, I think it could be the case that tribes feel their market share is being usurped by the operators in that sector. The prediction markets are a completely different animal because there is an argument that the states can’t touch them due to pre-emption, but that issue is being litigated in several forums, with varying results. I don’t think it’s the prediction markets or standard DFS causing the tribes to push so much. It’s Pick’em games and sweepstakes.
As someone who has successfully defended Apple against the US DoJ, how realistic do you think it is that these ‘new wave’ forms of gambling – DFS, sweepstakes and prediction markets – will be able to remain part of the regulated US landscape in the long term?
That will entirely depend on the different types of games and operators. I think DFS is here to stay. All the studies and all the court cases are on the side of traditional DFS.
I think DFS will remain legal in the US market
I think the sweepstakes and Pick’ems are on much more uncertain ground. Elsewhere, the Commodities & Futures Trading Commission under Trump looks like it’s going to allow prediction markets and event contracts, but that doesn’t mean that’s going to be the case long term. What we also know for sure is that some forms of legalized sports betting and non-gambling contests are here to stay in the US, no question about it.
As we know, VGW recently announced that they’re going to start paying sales tax revenue to states, something they’ve never done before. That’s obviously a play to try to be able to stay in the good graces of certain states and not get kicked out of the market(s) because they’re contributing tax revenue to the economy, and money drives everything. This is a new approach and maybe we will see more of this. Ultimately, however, DFS is not sports betting – and it’s also here to stay as regulated fantasy.
Reprinted with permission from The Gambling Insider on September 1, 2025. Further duplication without permission is prohibited. All rights reserved.
