DFS Industry Suffers Massive Blow After California AG Opinion Released

The daily fantasy sports industry suffered a massive blow in the Golden State today.

California Attorney General Rob Bonta released an opinion on the legality of the industry today, concluding an investigation that spanned nearly two years. He determined that these platforms were violating state laws against sports betting. This includes both pick ‘em and standard DFS games, meaning all operators will likely be forced out of the market.

Bonta’s opinion doesn’t carry legal weight on its own, but will undoubtedly lead to the state taking legal action.

Underdog Lawsuit to Delay Opinion Rejected

Just two days earlier, DFS operator Underdog filed a lawsuit asking that the release of the opinion be delayed. In the legal challenge, the company claimed that the Attorney General’s office gave them just three days' notice before the opinion was scheduled to be made. This wasn’t enough time to prepare for the massive impact, and the company hoped the court would give them more time.

The Sacramento judge rejected the argument yesterday, paving the way for the release today. 

The lawsuit reveals that Underdog was aware the opinion would likely be unfavorable to the DFS industry, but may not have fully understood its implications.

Opinion Worse Than Feared

While Underdog decided to take immediate legal action, other operators were preparing to adapt to whatever crackdown the Attorney General’s opinion would call for. PrizePicks made news yesterday by switching their pick ‘em games to a peer-to-peer model in anticipation, showing that they and the rest of the industry were unprepared for the scope of the opinion.

Instead of cracking down on game offerings, Bonta instead declared that all forms of DFS violate state gambling laws. That includes the class model, which FanDuel and DraftKings made popular over a decade ago. That means that instead of facing a cut to their revenue, operators will likely be forced to shut down altogether.

Did DFS Operators Get Too Greedy?

If you speak with proponents of the DFS industry, they will argue that states are unfairly targeting these platforms at the behest of sportsbooks. They believe that lawmakers misunderstand the industry and its potential to work in conjunction with legal sports betting.

However, there is an argument to be made that DFS operators brought this on themselves. Many took the legalization of sports betting as a green light to expand DFS offerings. Pick ‘em games and other over/under offerings began to gain popularity, with customers often able to find better prices when using this unregulated form of sports betting.

DFS proponents are correct about the industry being a threat to regulated sports betting, but that isn’t the only concern. With DFS platforms not being considered as gambling, many fear that customers at risk for problem gambling might view this as a safe alternative to sports betting. This is factoring into the rise of gambling addiction across the country, making them an easy target for lawmakers.