Sports Law Blog
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Sunday, July 30, 2006
The Law, Politics, and Linguistics of Fantasy Sports

Tim Lemke of the Washington Times has an excellent piece on how courts and Congress may address the growth of fantasy sports ("Licensing Case Could Hurt Rotisserie Sports," 7/29/2006). As also discussed recently by Geoffrey Rapp and Greg Skidmore (Geoff's post; Greg's post), Major League Baseball, which requires fantasy sports operators to obtain a license to use MLB statistics, is scheduled to go to trial on September 5 in a federal case against CDM Sports, a fantasy sports operator that claims that statistics generated by MLB players and teams should be useable without MLB's permission. In other words, CBC and MLB disagree on whether MLB has intellectual property rights in publicly-available statistics. Significantly, this is a case of first impression for fantasy sports, and should a holding eventually emerge (i.e., if the parties don't settle, which they probably will), it would have precedential value.

Considering that more $4 billion is spent annually on fantasy sports--with fantasy football and fantasy baseball leading the way--
leagues obviously have an interest in obtaining as much fantasy sports revenue as possible. So what legal arguments can they use to obtain that revenue? Here are a few arguments, each with its own set of flaws:

1) Statistics generated purely by league activities (i.e., the playing of games), comprise legally-protected league work product.

2) Fantasy league operators are using statistics not for a newsworthy purpose, but rather to profit off of them, and to do so with neither obtained consent nor payment made. There is precedent for this reasoning: baseball card companies and videogame companies must pay a fee for the use of team logos/colors/statistics etc., just as they must pay a fee for player names/images/statistics etc.

3) One might analogize league required licenses for commercial use of statistics to how movie and music industries require licenses in order to prevent pirated products.

Lemke also discusses how a recent effort by Congress to curb online gambling has exempted the fantasy sports industry. Specifically, in all three bills introduced in the 108th Congress that seek to prohibit Internet gambling (H.R. 21, H.R. 2143, and S. 627), the definition of “bets and wagers” excluded two types of activities: 1) certain financial instruments (stocks, commodities, derivatives, and insurance products) and 2) fantasy sports leagues.

Lemke interviews Christine Hurt and me for the political portion of story:
Why the exemptions?

"It makes passage more likely," said Michael McCann, an assistant professor of law at Mississippi College who specializes in sports law. "Most people like fantasy sports. It doesn't have that moral stigma that betting does. Fantasy sports can be just as addictive, but there's not as much outrage."

Supporters of the exemption argue fantasy sports are considered games of skill, but that characterization has angered some fans of online poker, who have pushed for their own exemption on the grounds their game is equally independent of luck.

The Senate could take up the online gambling bill when it reconvenes in September, but whether it will be passed into law is still unclear.

Perhaps the biggest reason for the fantasy sports exemption is that sports leagues, which have often railed against gambling because of its potential influence on the outcomes of games, have actually created and hosted their fantasy games, seeing them as a major part of what drives interest in their sports.

"Fantasy sports does not hurt the integrity of the sport, because it would almost be impossible to rig every game to make as much money" as straight betting on games, said Christine Hurt, a law professor at the University of Illinois who has examined Internet gambling laws. "Your success or failure doesn't depend on one team." But, she added, "if you're talking about the impact on the gambler, there's not that much of a distinction."
There's another portion of this topic to consider: the very use of the word "fantasy," almost as if
fantasy sports are somehow make-believe, even though real money is often used.

So what then distinguishes "fantasy" sports from online "gambling"? There are probably several things, including:

1) Fantasy sports are often more about staying in touch with friends and winning grudge matches than about making money; the subjective value of beating your friends in fantasy football is probably more valuable than the few hundred bucks you might make.

2) Some fantasy sports leagues do not involve money changing-hands, and are thus clearly not gambling in any way.

Any other thoughts about fantasy sports? Are they, in fact, "sports," much like poker or spelling bees are now apparently sports?


I don't think either side is necesarily wrong here. If you are a fantasy sports website owner, you feel as though you should be able to use the statistics because there is no specific guideline set not to. If your the MLB, you want your piece of the pie(which just happens to be $4 billion).

As soon as there is a set guideline this should be a dead issue. Maybe give MLB 5% of the Fantasy Baseball sales, maybe make a set yearly fee, or however you would want to do that and I think everyone would be alright with that in the long term. Short term would obviously leave the fantasy sports owners unhappy but for the people interested in starting their own fantasy sports business they now have a set guideline to go by amd expect before hand.

Anonymous Ron Jumper -- 7/31/2006 3:32 PM  

Michael and Ron,

My understanding of this case is that it's not an intellectual property issue regarding the use of stats. Besides, stats in and of themselves are in the public domain. The claim asserted by MLB is misappropriation of the players' names and likenesses associated with the stats via the $50 million license MLB obtained from the union. Thus, the only reason MLB can even assert this claim at all is because it's basically asserting the claims that the players, individually, might otherwise have against the fantasy league. The other professional sports leagues would not be able to assert a misapprop. claim against the fantasy leagues, but if MLB is successful in this lawsuit, I would think that it would be good precedent for the individual players in the other leagues (not the leagues themselves).

Blogger Rick Karcher -- 7/31/2006 11:39 PM  

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