Centers of Excellence: Lotteries

Did Delaware legalize sports gambling last week? Will Dover become the next Las Vegas? Not exactly. Although many news outlets reported that the Delaware Supreme Court legalized sports gambling in Delaware, most news outlets overstated the facts. Only licensed gambling facilities will be permitted to offer sports lotteries in Delaware. Even so, the Delaware Supreme Court’s opinion only expressly permits one type of sports lottery, that being a parlay lottery.

A new law was proposed in Delaware that would permit the Delaware Lottery Office to offer sports lotteries. The Governor of Delaware made a request to obtain an advisory opinion regarding whether the law as proposed would be legal. The Delaware legislature had proposed new laws that would legalize various types of sports lotteries. The Governor wanted an opinion on three types of lotteries:

(1) a single game lottery whereby an individual chooses the winning team of a game based on the proposed “line”;

(2) a total lottery whereby an individual selects the final score in a game based on the proposed “line”; or

(3) a parlay lottery whereby an individual selects an outcome of multiple elements, such as the winner of multiple games or multiple over/under bets

Under the law, the state lottery director would hire a bookmaker (or risk manager) to determine the “line” for all proposed games. The critical question that the Court analyzed was whether a sports lottery, which has chance, but some elements of skill, was a permissible lottery since the Delaware Lottery Office can only offer games which have prize, chance, and consideration. The proposed sports lottery certainly contains a prize and consideration. But if someone bets on sports, is it a game of skill or a game of chance?

Over thirty years ago, the NFL sued the State of Delaware for attempting to offer a lottery based on the outcome of NFL games. National Football League v. Governor of the State of Delaware, 435 F.Supp. 1372 (D. Del. 1977). In that case, the court determined that a permissible lottery did not have to entirely be a game of skill, a permissible lottery was one where the dominant factor of the promotion was chance.

Last week, the Delaware Supreme Court opined that chance is the dominant factor in parlay lotteries, and thus, a parlay lottery would be a permissible lottery under the new state law. Opinion of the Justices, No. 150 (Del. 2009). However, the Court did not state whether chance was the dominant factor in single game or total lotteries. Specifically, the Court was unclear on whether a hired bookmaker determining a “line” introduced sufficient chance in such a lottery.

Importantly, only lotteries offered by the State of Delaware would be permissible. Any company that is not licensed by the Delaware Lottery Office cannot offer a parlay lottery, or any form of sports lotteries under the new law. The types of lotteries that may be offered by Delaware Lottery Office could involve choosing the winners of multiple games during a given week (e.g., selecting all or some of the winners of NFL games in Week 6).

Again, while the analysis in the case is interesting, even the States’ passage of the bill will not automatically legalize sports gambling by individual companies.

This opinion provides us with some insight on how a court will determine whether a game is game of skill or chance. It appears unlikely that gambling facilities will expand throughout Delaware, or that this law will permit major sports gambling in Delaware.