California is cracking down on daily fantasy sports after Attorney General Rob Bonta declared that both sports picks and other fantasy contests are considered illegal betting under state law. This came following a request from state legislators to review daily fantasy sports platforms to determine whether or not they’re legal.
In Attorney General Rob Bonta’s statement, he states that “both types of daily fantasy sports games – pick’em and draft’style games – make ‘bets’ on sporting events in violation of section 337a.” Section 337a prohibits betting on sporting events.
Popular fantasy sports operators like Underdog are most affected by this because they primarily offer these types of games.
With pick’em, users combine prop bets of several players, such as Shohei Ohtani to get more than 1.5 total bases. If each pick is correct, the user wins a fixed sum depending on how many props are in their pick’em. This functions exactly as a parlay, which is effectively sports betting.
However, draft-style contests are where users build a team of players and obtain points whenever they perform well, such as a Puka Nacua touchdown. This has been mostly considered as different from sports betting because it involves more skill in building a roster.
We saw Underdog attempt to block Rob Bonta’s legal opinion on daily fantasy sports, but Judge Jennifer Rockwell denied this request, stating that this would not immediately harm the company.
Since California is such a large market where Underdog earns approximately 10% of their revenue, it’s not surprising to see pushback.
As for the immediate future, these platforms are still able to operate in California, but this formal opinion from Bonta provides a glimpse of what could be a rocky road for DFS in the Golden State further down the line.
The risk if DFS is removed from California is that players will be pushed towards offshore sportsbooks. These platforms do not generate revenue for the state, so it would be a missed opportunity for California.
With that said, DFS platforms like Underdog and PrizePicks also do not currently provide tax revenue for California. However, they have established themselves as reputable brands within the United States, whereas many offshore sites do not have the same reputation, often viewed as untrustworthy or unreliable, since they’re not licensed in the U.S.
With that in mind, a possible solution to this issue would be the legalization of sports betting in California.
After Prop 27 – which aimed to legalize online sports betting in California – was rejected in November 2022, there hasn’t been much momentum for legalization in recent years.
Aside from voters rejecting online sports betting in California, there have been struggles for tribal leaders like those from the California Nations Indian Gaming Association (CNIGA) and major operators like FanDuel and DraftKings to come to an agreement that serves the best interests of both sides.
California tribal leaders operate over 60 casinos within the state, so they’re a major player in this process. After rejecting online sports betting for the 2026 ballot, the only viable date for progress is the 2028 ballots at this point.
