Judge rejects daily fantasy sports company’s argument that its products are illegal

A federal judge has rejected a former Las Vegas area company’s novel legal argument that it should not be liable for a $1.1 million contract with a Minnesota hockey team because its daily fantasy sports products are illegal in the state.

In rejecting a motion to dismiss a lawsuit against the company, Emil Interactive Games LLC, on Wednesday, U.S. District Judge Wilhelmina Wright dodged the question of whether daily fantasy sports are in fact illegal in Minnesota.

She said the legal status of the online contests in which players compete for cash prizes by building a “team” of professional athletes and earn points – and often cash — based on their performance in real-world competitions is not relevant in the contract dispute.

The legality of daily fantasy sports games has been the subject of considerable legal debate in recent years, with a handful of states declaring them to be legal skill-based contests and others saying they are a form of gambling. In many other states, including Minnesota, there is no clear answer on the legality of the games.

The closely watched lawsuit revolves around a September 2015 contract between Emil Interactive Games LLC and the National Hockey League’s Minnesota Wild team in which the company was to pay the team more than $1.1 million in a sponsorship and advertising deal involving its DraftOps fantasy sports game.

In a complaint filed in May in state court and later transferred to federal court, the Wild said that Emil Interactive never made any payments and was in violation of the contract. It sought the $1.1 million in missed payments, plus 1.5 percent interest per month and $50,000 or more in damages. The suit also named Emil Interactive’s president, Las Vegas businessman Ronald Doumani, and Full Boat LLC, which it described as manager of Emil Interactive, as defendants.

Emil Interactive responded in June with a motion to dismiss the lawsuit based on the argument that the contests were not legal in the state.

“Engaging in online (daily fantasy sports) in the state of Minnesota is a crime, rendering any contracts for the promotion thereof void,” it said.

That dismayed advocates of daily fantasy sports, who feared that if the argument succeeded it could damage the industry as a whole, and outraged the Wild’s attorney, Steve Silton.

“That’s the most bizarre argument I’ve ever seen,” he told the Review-Journal earlier this year. “Essentially you’re arguing that you’re participating in a criminal conspiracy.”

Judge Wright danced neatly around the issue in her ruling on Wednesday, saying only that the status of daily fantasy sports was not germane to the contract dispute.

The dispute between the hockey team and the company “pertains to sponsorship and advertising, not gambling,” Wright wrote. “In short … a sponsorship agreement — not online (daily fantasy sports) — is at issue here.”

But she also said that the Wild had not provided sufficient evidence that Doumani, a scion of the family that helped establish Las Vegas as a center of legal gambling and once owned the Tropicana hotel and casino, and Full Boat LLC were responsible for the debt and dismissed the complaint against them.

Calls to Silton and Doumani seeking comment on Thursday were not returned. The Wild declined to comment.

Sigal Chattah of the Chattah Law Group in Las Vegas, who represents Emil Interactive, Doumani and Full Boat in the case, declined to discuss details of the judge’s ruling, but said the opinion could affect the broader debate over daily fantasy sports.

“The big story is you have a U.S. district judge refusing to declare daily fantasy sports as illegal in a state where the Legislature … has not declared it legal,” she said.

Emil Interactive closed its offices in the Las Vegas Valley in September 2015 after Nevada Attorney General Adam Laxalt issued an opinion that daily fantasy sports contests are “sports pools and gambling games” and thus should be licensed by the state. The company subsequently reincorporated in Delaware, but apparently has since suspended operations.

A previous version of this story incorrectly identified Nevada Attorney General Adam Laxalt.

Contact Mike Brunker at mbrunker@reviewjournal.com or 702-383-4656. Follow @mike_brunker on Twitter.