The nuanced politics of Bonta’s daily fantasy opinion

News that Attorney General Rob Bonta had ruled in early July that daily fantasy is illegal in California sparked a flurry of one–day stories about the opinion and reactions to it, most notably Gov. Gavin Newsom’s blunt disagreement with the AG.

The dynamics of the situation, however, are far more complex and nuanced than those basic narratives.

The tension over daily fantasy involves at least two competing factions within that industry as well as the state’s powerful gaming tribes, who view any encroachment on their casino operations as an existential threat.

Also serving as a backdrop are ongoing discussions about sports betting in the Golden State, a topic of keen interest to two brand-name fantasy operators who also run large online sportsbooks but who were soundly defeated by the tribes in an ultra-costly ballot box battle over sports gaming in 2022.

“This is a moment. The calm before the storm,” said Victor Rocha, a high-profile leader of California tribes who chairs an annual tribal gaming conference and founded the tribal politics and gaming news site Pechanga.net. “Everybody is reassessing.”

Two flavors of fantasy
The attorney general’s opinion found that daily fantasy games are illegal under California law “Because They Involve Betting on Sports,” and that remains illegal in the Golden State in the wake of the 2022 election.

The opinion broadly declares that all forms of daily fantasy are unlawful but also notes that there are two main types of daily fantasy games. The differences between those games serve as a critical line between the two factions of daily fantasy operators and impacts how the tribes perceive them, too.

As the opinion describes, sports betting involves bettors wagering directly against a sportsbook on the outcome of a sporting contest, say the final score of a game or a particular athlete’s performance in the game. If the bettor wins, the sportsbook or house loses.

Pick ‘em style fantasy games, which are offered by lesser-known fantasy operators PrizePicks and Underdog, operate in a way that some argue is analogous to sports betting. Participants choose several real-world athletes for their make-believe or fantasy team and then predict how they’ll do on an upcoming slate of games, such as the number of points they’ll score.

The pick ‘em operators offer participants a threshold, say 20 points, and the participants predict whether each of the athletes on their fantasy team will score above or below that. Participants in pick ‘em games compete directly against the operator. They pay an entry fee and win a prize if they pick correctly. If the participant wins, the pick ‘em operator loses, just like in sports betting.

Draft-style fantasy games, on the other hand, are different. Draft-style fantasy, which is offered by DraftKings and FanDuel, the two biggest names in fantasy sports, pits two or more participants against each other. Each participant selects real-world athletes for their fantasy teams and then those teams play make-believe contests against each other.

The points scored by each of the real-life athletes in real games are tallied up and the fantasy team with the most points scored wins. Participants in draft-style games earn their money from the collectively pooled entry fees paid by all the participants in the game.

Draft-style operators make their money by taking a cut of each entry fee, which means their financial wellbeing is not at stake in the contest itself. The operator never loses when a participant wins in the same way with sports betting or pick ‘em fantasy. (DraftKings does also offer a pick ‘em game, but that is a peer-to-peer product, where participants are competing against each other, not the operator.)

Different operators, different reactions
Still, Bonta declared both forms of daily fantasy – so called because the games last just a day or a few days – illegal under California Penal Code Section 337(a)(6), which outlaws making or accepting bets on the result of a contest “of skill, speed or power of endurance of person or animal, or between persons, animals, or mechanical apparatus.”

(Incidentally, the opinion also makes season-long fantasy contests for money illegal. That means the common practice of playing fantasy football with your buddies for money, perhaps through the NFL’s own fantasy football app, is now technically as unlawful in California as playing poker with them for cash at your kitchen table.)

Bonta’s rationale, essentially, was that both forms of daily fantasy offer payouts based on the outcome of sporting events, which in his analysis makes them gambling. The fantasy industry doesn’t see it that way.

“This is a moment. The calm before the storm.”

The pick ‘em camp says their games require skill, thus making them not games of chance. The draft-style camp says their games aren’t gambling because their operators aren’t involved in the action – they don’t lose if or when a participant wins.

But the draft-style camp also says that the other operators’ pick ‘em games are sports betting, comparing their games to a parlay (a single bet that links together multiple wagers, like that the both the Chiefs and Broncos will win). These are the two factions within the daily fantasy industry that are at odds with each other. (In August 2023, Underdog’s founder and CEO, Jeremy Levine, accused DraftKings and FanDuel of using state-level regulators to attack its business model. So, the criticism goes both ways.)

On one side, you have the draft-style fantasy operators, DraftKings and FanDuel, the marquee fantasy names who are also sportsbooks and who were heavily invested in the 2022 sports betting election that they lost to the tribes. They are now working overtime to try to develop relationships with their former rivals.

On the other side, you have the pick ‘em operators, PrizePicks and Underdog, among others, who aren’t the household names of DraftKings and FanDuel, but who had been investing in expanding their market share in California while their model was questioned in several other states. (These questions were addressed, in part, by switching some games to a peer-to-peer product.)

Unlike their big-name, draft-style competitors, these pick ‘em operators don’t have another huge source of income (i.e. large sportsbooks) while PrizePicks also appears to be searching for someone to merge with it or buy it out.

Which makes it problematic to have the attorney general undercut their business model in a market as large as California. This might offer some insight into why the two camps responded differently to the Bonta’s ruling.

Both DraftKings and FanDuel expressed their desire to talk through things with the attorney general and work with stakeholders.

“We look forward to meeting with the Attorney General’s office to talk through our next steps,” FanDuel said in a statement that it put out on the day the opinion was released and reiterated to Capitol Weekly when contacted for comment on this story.

A DraftKings spokesperson also offered Capitol Weekly the same statement it gave in early July: “DraftKings respectfully disagrees with the interpretation expressed with respect to peer-to-peer fantasy sports contests in the non-binding advisory opinion issued by the Attorney General of California. We believe peer-to-peer fantasy sports contests, including Salary Cap, Pick 6 and Best Ball, are legal in California, and we intend to continue offering them – as we have done without challenge or issue for over 13 years. Notably, the overwhelming body of law from 24 states and Congress confirms that fantasy sports contests are legal games of skill. In addition, the highest courts in Illinois and New York previously held that peer-to-peer fantasy sports contests are legal games of skill. We intend to work with stakeholders, including the Office of the Attorney General, to try to find an amicable resolution.”

Underdog took a different tact. It tried suing Bonta to stop him from releasing the opinion. Meanwhile, PrizePicks suddenly switched its model from participants competing against the house to participants competing against each other in apparent anticipation of the opinion’s release.

New players in state politics
PrizePicks and Underdog seem to have only become interested in California politics around the time when the attorney general said it would rule on the legality of daily fantasy.

DraftKings has been contributing to California officials since the 2013-14 cycle; FanDuel started giving in 2015-16. Both have had a lobbying presence since at least 2015-16. Both were major funders of Proposition 27, the 2022 ballot initiative backed by large online gaming companies that would have legalized online sports betting in California.

That ballot measure, along with Proposition 26, which was supported by the gaming tribes and would have legalized in-person sports betting at tribal casinos and horse racing tracks, failed in what was called the most expensive ballot campaign in U.S. history. Even so, California’s gaming tribes were universally declared the winner of that campaign, having solidified through the murky battle that they hold the political keys to gambling in the Golden State.

The opinion broadly declares that all forms of daily fantasy are unlawful but also notes that there are two main types of daily fantasy games. The differences between those games serve as a critical line between the two factions of daily fantasy operators and impacts how the tribes perceive them, too.

Conversely, both PrizePicks and Underdog did not start giving, or establish a lobbying presence, until the 2023-24 cycle. The attorney general’s inquiry was sparked by an October 2023 request by former Republican Sen. Scott Wilk. (The attorney general was so slow in producing its opinion on daily fantasy that in October 2024 a current legislator, Assemblymember Tom Lackey (R-Palmdale), had to take over the request because Wilk termed out at the end of that year.)

That means neither of the pick ‘em operators were involved in the bruising 2022 election, which taught the draft-style fantasy (and sportsbook) operators a costly lesson about dealing with California’s gaming tribes. (The pick ‘em operators are also newer companies. FanDuel was founded in 2009, for example, while Underdog was founded in 2020.) Since their ignominious defeat in 2022, DraftKings and FanDuel have been trying desperately to make inroads with the tribes, which they now say is their only pathway to legalizing sports betting in California.

Since the fall of 2023, FanDuel has hired several former tribal leaders, including a former chief operating officer of Yuhaaviatam of San Manuel Nation (also known as the San Manuel Band of Mission Indians, the owners of both the Yaamava’ Resort & Casino at San Manuel in San Bernardino County and Palms Casino Resort in Las Vegas)  and a former chairman of the federal National Indian Gaming Commission.

In late March, Jason Robins, CEO and co-founder of DraftKings, and Christian Genetski, president of FanDuel, appeared on stage with Rocha, the tribal leader, at this year’s Indian Gaming Tradeshow & Convention in San Diego, where they talked about the power of partnerships.

But despite DraftKings and FanDuel’s efforts to this point, they have not been able to reach any sort of agreement with the tribes. Indeed, it’s debatable whether they’ve built any inroads at all.

The tribes’ ire
In mid-June, PrizePicks, Underdog and a third pick ‘em operator, Sleeper, attempted to gut and amend a bill in the Legislature to head off the attorney general’s opinion. The move angered the tribes who quickly mobilized to help stop the gut-and-amend from getting off the ground.

Rocha told Capitol Weekly that California’s gaming tribes have been gunning for pick ‘em operators for a while. He said that they view their pick ‘em games as gambling by another name, which steals revenue that rightly belongs to them.

He said the tribes asked Wilk to request the opinion from the attorney general.

“You have to fight ‘em or you’ll get rolled over,” said Rocha, a member of the Pechanga Band of Luiseño Indians, owners of the Pechanga Resort Casino in Temecula, one of the state’s most successful tribal casinos.

As for the draft-style fantasy operators also affected by the opinion, Rocha said the tribes view the attorney general’s ruling as an “opportunity” to “help them redefine the industry.” But that sort of discussion, he added, shouldn’t be perceived as occurring within the context of DraftKings and FanDuel’s attempts to partner with tribes on sports betting.

From the tribes’ perspective, he said, there is nothing to discuss at this point, no “commonality” has been reached between the two camps.

James Siva, chairman of the California Nations Indian Gaming Association, otherwise known as CNIGA, said in a prepared statement after the opinion was released that while the association appreciates that the attorney general has stood up for rule of law “it is also very clear that California has long turned a blind eye to illegal gambling – at the direct expense of tribal governments. Untold millions if not billions have been illegally wagered over the past decade. Where is the enforcement? Where is the accountability?”

Siva called for “strong enforcement” and accountability to back up the opinion.

‘Why we fight so hard’
Rocha said that the tribes want to see the new opinion enforced but also wonder if they’re going to have to “go to the mattresses ourselves.”

The tribes, of course, do not shy away from a fight when it comes to protecting their interests, and they recently embarked on a new front with the gut and amend of AB 831 by Assemblymember Avelino Valencia (D-Anaheim). That bill would prohibit in California sweepstakes gambling, which uses virtual currencies that can be redeemed for real prizes.

This is in addition to a separate fight that California gaming tribes have joined with other tribal nations across the country against a company called Kalshi, which was recently the subject of a long feature story on ESPN.com. Kalshi is one of a handful of nationwide prediction markets where online users can buy contracts – essentially predictions – on future events, including the outcomes of elections and sporting events. Kalshi and other prediction markets are regulated at the federal level, by the Commodity Futures Trading Commission.

But in practice, as the ESPN piece and many others have pointed out, Kalshi operates like a sportsbook, where users can bet on the outcome of games. Sportsbooks are regulated at the state level. The state of New Jersey tried to get Kalshi to stop what it’s  doing, but the company took the state of federal court, where the case is now on appeal.

More than 60 tribal governments and tribal organizations across the country – including several of the biggest hitters from California – submitted an amicus brief in June on the case.

California’s gaming tribes see both sweepstakes gambling and prediction markets as other forms of encroachment into their gambling operations.

“Tribal gaming is the only thing that’s worked for tribes since Columbus,” Rocha said. “…That’s why we fight so hard.”

The tribes, Rocha added, are thinking long term. He said they recognize, for example, that the push for sports betting in California is really just a prelude to attempts to legalize online gambling (also known as iGaming) in the state. That could decimate tribal casinos.

Rocha described competing gaming operators as “looking over your shoulder,” eying tribal casino customers and revenue.

What’s next
The attention now turns to whether the attorney general’s opinion will actually be enforced.

While Underdog’s attempt to secure a temporary restraining order to prevent Bonta from releasing his opinion failed, the pick ‘em operator did notch a win: Sacramento County Superior Court Judge Jennifer K. Rockwell ruled in the case that the AG’s opinion is just an opinion.

In her ruling rejecting Underdog’s request for a restraining order, Rockwell said, “the Attorney General’s issuance of an opinion of pursuant to Government Code section 12519 does not effect any change in the law. (People v. Vallerga (1977) 67 Cal.App.3d 847, 870 [“the opinions of the California Attorney General are advisory only and do not carry the weight of law”].) Accordingly, Petitioners have not established that they will suffer harm as a result of the issuance of Opinion No. 23-1001.”

“Tribal gaming is the only thing that’s worked for tribes since Columbus.…That’s why we fight so hard.”

This seems to raise doubt whether the attorney general’s opinion can or will be enforced.

In fact, since the opinion’s release on July 3 – right before the Fourth of July, without a statement from the AG himself, strongly suggesting this wasn’t an issue Bonta wanted to make a big deal about – no fantasy operators apparently have changed what they’re doing in California. Daily fantasy continues to be offered in the Golden State exactly as it was before the beginning of July.

Newsom’s role in potential enforcement also shouldn’t be overlooked. Izzy Gardon, a spokesman for the governor, said in the wake of the attorney general’s ruling, “The Attorney General, in his independent capacity, issued this opinion – not the Governor’s office.”

Newsom has not clarified his position since then. But he’s talked on his podcast about concerns that Democrats are losing the support of young male voters. It’s not a major leap to think that he could see the outlawing daily fantasy, which is popular with young men, as bad politics.

Divergent interests?
Underdog appeared to emphasize these two points when Capitol Weekly reached out to the Brooklyn-based fantasy operator for comment. Rather than offering a comment itself, the company pointed to a statement issued on July 3 by J.T. Foley, executive director of the Coalition for Fantasy Sports, which represents pick ‘em operators.

“We agree with Governor Newsom — AG Bonta got it wrong,” Foley said. “As the Court said yesterday, this opinion ‘does not effect any change in law’ and does ‘not carry the weight of law.’ The law has not changed, a fact the last two Attorneys General, Kamala Harris and Xavier Becerra, recognized as they specifically declined any similar action. We are hopeful the Attorney General heeds the Governor’s call to find a constructive solution that preserves the games that California sports fans love.”

Two days after Underdog directed Capitol Weekly to Foley’s comments, it followed in PrizePick’s example and changed the format of its pick ‘em game to a peer-to-peer format in California on July 16.

PrizePicks, Sleeper and the coalition itself did not respond to Capitol Weekly’s request for comment. Also not responding: Bonta. (Newsom’s office just reiterated Gardon’s statement.)

Given that DraftKings and FanDuel’s sportsbooks are far more lucrative than their daily fantasy operations, both are likely more interested in seeing sports betting eventually legalized in California than any worries they may have about losing fantasy revenue in the state. (Underdog does have a sportsbook in North Carolina and is seeking another in Missouri, but it operates daily fantasy in dozens of states. DraftKings and FanDuel have sportsbooks in many more states.)

It’s at least possible they might even be willing to sacrifice their daily fantasy games here if it meant cutting a deal with the gaming tribes.

Then again, while they have similar interests, DraftKings and FanDuel’s interests aren’t exactly the same either. DraftKings commands significantly more of the market share in California than FanDuel, due to it offering a popular peer-to-peer pick ‘em game, according to industry data.

(The two companies employed the same lobbying firms for four cycles – 2015-16 to 2021-22 – until they split in the 2023-24 cycle. Today, DraftKings is represented by Campbell Strategy & Advocacy while FanDuel employs Niemela, Pappas and Associates.)

DraftKings could have a greater fiscal incentive to fight to preserve its daily fantasy offerings than FanDuel. That could affect what happens next in this tangled saga.