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What Washington fantasy ruling can teach us about New York AG case

DraftKings and FanDuel are eagerly awaiting the ruling in the New York AG case. AP Photo, Reuters/Lucas Jackson

While New York Judge Manuel Mendez deliberates the fate of daily fantasy offerings in New York following last week's preliminary injunction hearing, documents reveal that regulators in the state of Washington were likely first to commence an enforcement action against a fantasy sports company.

"An eight-month investigation by the Washington State Gambling Commission (WSGC) has determined that David Watkins owned and operated an online gambling website called Fantasy Thunder," wrote Special Agent Eric Gural in a 37-page case report recently obtained by Chalk.

The Fantasy Thunder case in Washington resulted in a guilty plea "to one count of attempted transmitting and receiving gambling information and forfeiture of $100,000" according to an April 5, 2011, memo also written by Gural. In addition, the website owner was sentenced to 12 months of probation and ordered to pay court costs.

The case is now closed.

The 2011 shutdown of Fantasy Thunder -- a NASCAR-focused fantasy site based near Spokane, Washington, and in operation for about five years according to witness testimony -- was mentioned in court filings now before Judge Mendez.

"[W]e are unaware of any published enforcement actions against any fantasy operators so far other than an action against a fantasy NASCAR operator in Washington State," wrote Marc J. Zwillinger and Jacob A. Sommer in a Nov. 10, 2014, letter to FanDuel CEO Nigel Eccles and NBA executive Sal LaRocca. "Some fantasy sports sites exclude Washington because it is the only state so far to prosecute an operator of a fantasy sports site."

The 24-page letter by Zwillinger and Sommer was included in New York court filings last week.

The Fantasy Thunder enforcement case in Washington -- a state with laws similar to those in New York -- may foreshadow developments in the Empire State and other jurisdictions.

"Washington State and New York State laws have identical statutory definitions of 'gambling' and 'contest of chance,'" wrote New York Attorney General Eric Schneiderman in his formal complaint dated Nov. 16, 2015. "Relying on those definitions, the [WSGC] has previously declared that online 'fantasy sports wagering is not authorized for play in Washington State.'"

Spokeswoman Susan Newer confirmed that the WSGC has commenced an investigation in response to allegations in the New York case.

The WSGC's new investigation was first reported by The Boston Globe last month.

"We receive email complaints over our agency website," said Newer from WSGC headquarters in Olympia, Washington. "We do have investigations pertaining to DFS, but I am unable to provide any specific information given the ongoing nature of the investigations.

"Any DFS company operating in Washington or providing services to Washington residents would be illegal under state law."

According to the detailed case report in the Fantasy Thunder enforcement action, an attorney for the fantasy operator briefly posited that his client's offerings were "a game of skill," but there is no evidence that arguments about how fantasy sports fit within the skill-versus-chance debate were considered by enforcement officers prior to recommending criminal charges.

This is in contrast to the pending New York case, in which lawyers on both sides are making considerable arguments about whether daily fantasy is a permissible skill-based activity or an illegal gambling activity in which chance is a material element.

The legal status of daily fantasy sports in Washington state may be changing regardless.

A bill to legalize certain forms of DFS was proposed in the Washington legislature earlier this year, but it was not passed. The WSGC recently completed a comprehensive 41-page study of daily fantasy and the Washington Senate held hearings on the possibility of permitting daily fantasy.

"The legislature will be the one to decide who would license and regulate DFS if it is legalized," said Newer. "If they give that authority to [us], we would do it."