Are paid fantasy sports contests with cash prizes illegal gambling under Tennessee law?

Plain-English summary

A state representative asked whether paid fantasy sports contests, the kind run by daily fantasy operators where participants pay an entry fee, draft virtual rosters, and compete for cash prizes based on real-world athlete performance, were illegal gambling under Tennessee law.

The AG concluded they were. Tennessee defines "gambling" in Tenn. Code Ann. § 39-17-501(1) as "risking anything of value for a profit whose return is to any degree contingent on chance." The opinion identified two reasons paid fantasy contests fit. First, participants risked an entry fee for a profit (a share of the prize pool). Second, the outcome was at least partly contingent on chance, because no participant controls the actual on-field performance of the athletes they pick, and those performances are affected by injuries, weather, officiating, and other unpredictable factors. The three statutory exceptions in § 39-17-501(1) (lawful business transactions, legislatively approved charitable events, and the state lottery) did not apply. Without legislation specifically exempting fantasy contests, they fell within the gambling prohibition.

Currency note

This opinion was issued in 2016. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Background and statutory framework

The opinion sits against the Tennessee Supreme Court's holding in State v. Burkhart, 58 S.W.3d 694 (Tenn. 2001), which recognized that the 1989 revisions to Tennessee's gambling statutes deliberately broadened the definition beyond what prior law had reached. The Sentencing Commission Comments accompanying the 1989 Act made clear the legislature's intent: "any scheme by which value is risked upon a chance for greater value" was meant to qualify, including lotteries, pyramid clubs, numbers, pinball, poker, and "any as yet unnamed scheme where value is risked for profit."

The current definition at § 39-17-501(1) was the foundation for the AG's analysis. The statute reads, with limited carve-outs:

Gambling is contrary to the public policy of this state and means risking anything of value for a profit whose return is to any degree contingent on chance, or any games of chance associated with casinos . . .

The statutory carve-outs cover (A) lawful business transactions, (B) certain charitable annual events authorized by a two-thirds vote of the General Assembly, and (C) the state lottery authorized by amendment to the Tennessee Constitution. None of those reach fantasy sports.

Three elements made paid fantasy contests fit the definition:

1. Risk of something of value. Players pay an entry fee to enter a contest. That entry fee is at risk: if a player's drafted roster underperforms, the fee is forfeited to the prize pool and the operator's cut.

2. A profit. Players who finish above the prize threshold receive a payout funded by other players' entry fees.

3. Outcome contingent to any degree on chance. This is where many fantasy operators have argued their contests are predominantly games of skill. The AG did not engage that "predominance" debate. The Tennessee statute does not ask whether skill predominates; it asks whether the outcome turns to any degree on chance. Once the AG identified the unavoidable chance elements (injuries, weather, officiating, an athlete's bad night, a benching), the test was satisfied. The participants do not control what happens on the field on any given Sunday.

The AG also addressed the lottery point in a footnote. Tennessee courts have long treated lotteries as a species of gambling (France v. State, 65 Tenn. 478 (1873); State v. Smith, 10 Tenn. 272 (1829)), and Secretary v. St. Augustine Church, 766 S.W.2d 499 (Tenn. 1989), struck down a statute permitting charitable bingo because bingo qualified as a "lottery" within the meaning of article XI, § 5. The constitutional bar on lotteries imposes an additional constraint on the General Assembly's ability to authorize gambling: any attempt to legalize a contest like daily fantasy would need to avoid being labeled a lottery, or would need a constitutional amendment.

Common questions

Q: Does this opinion ban fantasy sports?
A: AG opinions in Tennessee are advisory. The opinion did not itself ban anything. It told law enforcement and the legislature that, on the AG's reading, fantasy contests already met the statutory definition of gambling, and existing criminal statutes (Tenn. Code Ann. §§ 39-17-502, 39-17-503) applied.

Q: What about free contests or contests where the prize is not cash?
A: The opinion addressed paid contests with cash prizes. A contest with no entry fee or no monetary value at risk might not satisfy the "risking anything of value" element. The opinion did not opine on every variation.

Q: Could the legislature legalize fantasy sports?
A: Yes. The opinion explicitly noted that "[t]he General Assembly has the power to exclude from the definition of 'gambling' any fantasy sports contest that is not prohibited by the state constitution or the federal constitution."

Q: Does "to any degree contingent on chance" really mean any chance at all?
A: That is the statutory text. The Sentencing Commission Comments and Burkhart support reading it broadly. Operators have argued fantasy sports are predominantly skill-based, but Tennessee's statute does not use a predominance test.

Citations and references

Statutes (as cited in the opinion):

• Tenn. Code Ann. § 39-17-501(1) (definition of gambling)
• Tenn. Code Ann. § 39-17-502 (gambling offense)
• Tenn. Code Ann. § 39-17-503 (aggravated gambling promotion)
• Tenn. Const. art. XI, § 5 (anti-lottery provision)
• 1989 Tenn. Pub. Acts, ch. 591, § 114 (definition revision)

Cases:

• State v. Burkhart, 58 S.W.3d 694 (Tenn. 2001)
• Montgomery v. Hoskins, 222 Tenn. 45, 432 S.W.2d 654 (1968)
• Perry v. Lawrence Cnty. Election Comm'n, 219 Tenn. 548, 411 S.W.2d 538 (1967)
• Williams v. Carr, 218 Tenn. 564, 404 S.W.2d 522 (1966)
• Secretary v. St. Augustine Church, 766 S.W.2d 499 (Tenn. 1989)
• France v. State, 65 Tenn. 478 (1873)
• State v. Smith, 10 Tenn. 272 (1829)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2016/op16-013.pdf

Original opinion text

April 5, 2016
Opinion No. 16-13
Legality of Fantasy Sports Contests in Tennessee

Question
Do fantasy sports contests constitute illegal gambling under Tennessee law?

Opinion
Yes.

ANALYSIS

Fantasy sports contests are contests in which participants choose current athletes in a given
professional or college sport to create a virtual sports team and then compete against other fantasy
sports participants. The contests may take place over a variety of time periods ranging from one
day to an entire season. The winners of the contests are determined on how the participants' chosen
athletes individually perform in their actual professional or college sporting events.

The contests are generally offered by fantasy sports leagues via electronic device.
Participants create accounts with the fantasy sports leagues and pay an entry fee to participate in
one or more of a league's fantasy sports contests. The participants then select their respective
teams of athletes in a certain sport, often under an imaginary salary limit or budget. Participants
earn points based on the statistical performance of the athletes in the actual sporting events.
Depending on the athletes' overall performances, a participant may win a share of a cash prize.
Participants' entry fees help fund the prize, and a portion of these fees is paid to the fantasy sports
league.

"Gambling" is illegal in Tennessee. A person who knowingly engages in "gambling"
commits a punishable offense. Tenn. Code Ann. § 39-17-502. Similarly, a person commits a
punishable offense when that person knowingly induces or aids another to engage in gambling,
and intends to derive or derives an economic benefit other than personal winnings from the
gambling. Tenn. Code Ann. § 39-17-503.

"Gambling" is broadly defined under Tennessee law. In 1989, the General Assembly
revised the definitions of gambling offenses in this state and made known its intention to thereby
depart from more narrow definitions found in prior law. See State v. Burkhart, 58 S.W.3d 694,
698 (Tenn. 2001).

Tennessee Code Annotated § 39-17-501(1) currently provides:

Gambling is contrary to the public policy of this state and means risking anything
of value for a profit whose return is to any degree contingent on chance, or any
games of chance associated with casinos, including, but not limited to, slot
machines, roulette wheels and the like. For the purposes of this chapter gambling
does not include:
(A) A lawful business transaction;
(B) Annual events operated for the benefit of nonprofit organizations that are
authorized pursuant to a two-thirds (2/3) approval of the general assembly, so long
as such events are not prohibited by the state constitution; or
(C) A state lottery of the type in operation in Georgia, Kentucky, and Virginia in
2000 and authorized by amendment to the Constitution of Tennessee, if the lottery
is approved by the general assembly[.]

Tenn. Code Ann. § 39-17-501(1) (emphasis added).

The breadth of the definition of "gambling" is evidenced by the Sentencing Commission
Comments, which provide in pertinent part: "The commission intends to include any scheme by
which value is risked upon a chance for greater value as a 'gambling' offense. The definition of
'gambling' includes lotteries, chain or pyramid clubs, numbers, pinball, poker or any as yet
unnamed scheme where value is risked for profit." These Comments confirm the General
Assembly's intent to broadly define "gambling" because the General Assembly specifically
approved the publication of these Comments. See Burkhart, 58 S.W.3d at 698 (citing 1989 Tenn.
Pub. Acts, ch. 591, § 114).

As set forth above, the statutory definition of "gambling" is straightforward and
unequivocal. In short, "gambling" in Tennessee means "risking anything of value for a profit
whose return is to any degree contingent on chance," subject to the three stated exceptions. See
Tenn. Code Ann. § 39-17-501(1). It is well established that clear and unambiguous statutes must
be given effect as written. See Montgomery v. Hoskins, 222 Tenn. 45, 47, 432 S.W.2d 654, 655
(1968).

Fantasy sports contests fall within the broad definition of "gambling" under Tennessee
Code Annotated § 39-17-501(1). The participants pay an entry fee in order to win a prize. A
portion of the fees comprise the pot of funds that are paid out to the winning participants. By
proffering these entry fees, participants agree to risk something of value for a profit, a portion of
the pot. Hence, the only remaining consideration is whether a participant's ability to win a fantasy
sports contest is to "any degree contingent on chance." While participants may use skill to select
players for their teams, winning a fantasy sports contest is contingent to some degree on chance.
Namely, the participants do not control how selected athletes perform in actuality on a given day.
Athletes' performances are affected by many fortuitous factors, weather, facilities, referees,
injuries, etc.

Thus, absent legislation specifically exempting fantasy sports contests from the definition
of "gambling," these contests constitute illegal gambling under Tennessee law. The General
Assembly has the power to exclude from the definition of "gambling" any fantasy sports contest
that is not prohibited by the state constitution or the federal constitution. See Perry v. Lawrence
Cnty. Election Comm'n, 219 Tenn. 548, 551, 411 S.W.2d 538, 539 (1967); Williams v. Carr, 218
Tenn. 564, 578, 404 S.W.2d 522, 529 (1966). See, e.g., Secretary v. St. Augustine Church, 766
S.W.2d 499 (1989) (finding statute permitting charitable bingo unconstitutional because bingo was
"lottery" within the meaning of article XI, section 5 of the Tennessee Constitution).

Lotteries are a species of gambling. See France v. State, 65 Tenn. 478, 481 (1873); State
v. Smith, 10 Tenn. 272, 283 (1829).

HERBERT H. SLATERY III
Attorney General and Reporter

ANDRÉE SOPHIA BLUMSTEIN
Solicitor General

LAURA T. KIDWELL
Senior Counsel

Requested by:
The Honorable Craig Fitzhugh
State Representative
33 Legislative Plaza
Nashville, Tennessee 37243-0182