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Texas Attorney General says daily fantasy sports are 'prohibited gambling'

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Daily fantasy sports sites DraftKings and FanDuel have another legal challenge, this time in Texas. Attorney General Ken Paxton said today wagering real money based on the performance of a sporting participant was "prohibited gambling in Texas" so long as a company like DraftKings takes a cut. Daily fantasy involves creating imaginary teams of real players and betting based on their real-world performance. It differs from regular fantasy sports because companies like FanDuel accelerate seasons to allow for faster betting at higher stakes.

"Because the outcome of games in daily fantasy sports leagues depends partially on chance, an individual’s payment of a fee to participate in such activities is a bet," Paxton wrote in a non-binding opinion. In other words, Paxton hasn't banned daily fantasy sports outright, but he is suggesting state courts do so under Texas law. State Rep. Myra Crownover, when asking Paxton to take up the issue last November, noted how Texas typically criminalizes gambling. There are more than 2 million fantasy sports players in Texas, according to the Fantasy Sports Trade Association.

Texas is the latest state to consider banning daily fantasy sports

Texas joins nearly a half-dozen states currently challenging DraftKings and FanDuel, which collectively control around 90 percent of the market, on the legality of daily fantasy sports. The companies insist the game is skill-based, thereby exempting it from a federal ban on online gambling. Critics say it's no different than online poker, which is illegal in the US.

"We strongly disagree with the Attorney General’s prediction about what the courts may or may not do if ever presented with the issue of whether daily fantasy sports are legal under Texas law," DraftKings said in a statement. "The Texas Legislature has expressly authorized games of skill, and daily fantasy sports are a game of skill." DraftKings says it plans to continue operating in Texas.

The biggest battleground right now is New York, where the state's attorney general had both businesses briefly shut down. Although DraftKings and FanDuel have since been granted the right to continue operating in the state during the appeals process, the decision there could have industry-wide implications due to the large number of players in the state.

Update Tuesday January 19th 3:48PM ET: Added comment from DraftKings.