Paxton argues suit is in wrong court
AG wants fantasy sports case moved or tossed
AUSTIN — Texas Attorney General Ken Paxton on Monday questioned the jurisdiction of a Dallas County court over a fantasy sports company suit filed against him and sought to move it to Travis County or dismiss it altogether.
“This lawsuit reflects a corporation’s attempt to protect its preferred business model: profiting from paid online daily fantasy sports in Texas,” Paxton said in a motion contending the fantasy sports giant DraftKings filed its case in the wrong kind of court in the wrong Texas county.
Daily fantasy sports play is a multibillion-dollar national enterprise facing scrutiny in Texas and in other states across the country where officials are grappling with whether to regulate, allow or ban it outright.
Paxton is seeking to move the lawsuit from Dallas County, where DraftKings filed it two months ago, to Travis County, the seat of state government. The attorney general said that this type of lawsuit against him must be filed there, and that the actions that prompted the case took place in Travis County.
In addition, Paxton said, the action should be filed in a criminal court because civil courts “lack jurisdiction to construe criminal statutes.” The Dallas Count court specializes in civil matters.
Even if the Dallas County court decides that it has jurisdiction, Paxton said, the case should be dismissed. Paxton earlier this year issued a legal opinion that daily sports play amounts to illegal gambling under state law. In response, DraftKings filed its court petition in March, asking for a declaratory judgment that daily fantasy sports contests are legal in Texas.
“This relief is necessary to prevent immediate and irreparable harm to DrafKings, which otherwise could be forced out of business in Texas — one of its three largest state markets — and irrevocably dam-
“This lawsuit reflects a corporation’s attempt to protect its preferred business model: profiting from paid online daily fantasy sports in Texas.” Ken Paxton, attorney general
aged nationwide,” the fantasy sports business said in its petition.
It said it wants to prevent Paxton “from further acting to eliminate daily fantasy sports … contests enjoyed by hundreds of thousands of Texans for the past decade.”
DraftKings said it filed its lawsuit in Dallas County because many of its customers are there, a number had closed their accounts after Paxton’s opinion and that there are implications for future and existing business partnerships in Dallas, including its partnership with the Dallas Cowboys. It said the court is the proper one to decide on the declaratory judgment it is seeking
The lawsuit came after Paxton issued his opinion on online fantasy sports in January. He had been asked to formally weigh in on the matter by a state lawmaker.
Attorney general opinions, while substantive, are nonbinding interpretations of the law. Such opinions generally are regarded by courts as persuasive and entitled to careful consideration, but courts have the authority to make binding determinations on the law.
Unlike traditional fantasy sports in which people pick their dream teams for a season, daily fantasy sports players can choose a new team each day or week using sports sites that advertise big payoffs.
Supporters say daily fantasy sports play involves skill and so is distinct from pure gambling. But officials in some states have called it a gambling enterprise that should be regulated or prohibited.
Paxton said in his January legal opinion that because the outcome in daily fantasy sports depends partly on chance, a court would likely find the practice to be illegal gambling under state law. Industry leaders disagreed.
“Simply put, it is prohibited gambling in Texas if you bet on the performance of a participant in a sporting event and the house takes a cut,” Paxton said in a statement when he released his opinion.
He also made clear that traditional fantasy sports are legal, since players typically split the pot without a house cut. He pointed out that participants would be able to use a defense to being prosecuted “when play is in a private place, no person receives any economic benefit other than personal winnings, and the risks of winning and losing are the same for all participants.”
FanDuel, the other chief daily fantasy sports site, agreed in March that it would stop paid contests in Texas this month. It said that it believes its operations are legal but because the law surrounding fantasy sports requires clarity, it would focus on making its case to the Legislature, which next meets in regular session in 2017.