Fantasy sports, in which participants assume the role of a general manager of a fictional sport team, have existed for decades. However, with the development of the Internet, fantasy sports websites have proliferated and become a multi-billion dollar business in which millions of sports fans participate.

Traditionally, participating in fantasy sports means signing up on a fantasy sports website, drafting a group of real-life sports players to create a team and then managing that team throughout the course of a season, or, depending on the format, multiple seasons. In this traditional format, participants can do just about anything with their fantasy team that an actual general manager can do, such as trading and dropping underperforming players. Generally speaking, participants pay an entry fee in order to participate in contests and, after drafting their team, compete against other participants. Points are awarded based on the real-life performance of the drafted sports players. At the end of a season, the most successful participants will win the largest portion of the prize pool, which is made up of the entry fee paid by all the players in a given fantasy sports contest. Success at traditional fantasy sports requires months of dedication, and many would argue, considerable skill at managing the fictional sport team.

In recent years, however, a new and immensely popular form of fantasy sports has emerged: daily fantasy sports (DFS). In most aspects, DFS is indistinguishable from the traditional variety. However, unlike traditional fantasy sports, in which participants will manage their team over the course of an entire season, or multiple seasons, DFS participants create fantasy teams for contests that span much shorter periods of time, often a single day. This short time frame raises questions about the role of skill, versus chance, in being successful at DFS.

This distinction may seem unimportant to participants in fantasy sports, but it has prompted considerable legal action in certain American states due to concerns that DFS websites are in fact running gambling businesses. For example, on Nov. 10, 2015, the attorney general of New York state issued a cease and desist notice to FanDuel Inc., one of the largest DFS websites in the world, directing it to stop taking wagers in New York. The basis for the cease and desist notice was the result of an investigation initiated by the office of the New York state attorney general that concluded, after noting the differences between traditional fantasy sports and DFS, "that FanDuel's operations constitute illegal gambling under New York law." Other states, notably Nevada, have also begun to investigate or take legal and regulatory action against DFS services. The recent crackdown on DFS in the United States leads to the question of whether DFS websites are compliant with Canadian law.

As a general rule, it is an offence under Part VII of the Criminal Code to operate a gambling business dependent on the playing of a "game." Subsection 197(1) of the Criminal Code defines a "game" as "a game of chance or mixed chance and skill." Accordingly, based on this definition, games of pure skill are not caught by the prohibition on operating a gambling business.

The leading Canadian case on classifying a game for the purpose of the Criminal Code is R. v. Ross [1968] SCR 786. In Ross, the Supreme Court of Canada explains that in determining whether a game is one of pure skill, it is not enough to demonstrate that skill is the dominant element of any game. The court further notes that in any human activity, there is always an element of chance involved, however, what the Criminal Code contemplates is "not the unpredictables that may occasionally defeat skill but the systematic resort to chance involved in many games such as the throw of dice, the deal of cards."

The Ontario Court of Appeal clarified in R. v. Balance Group International Trading Ltd. 162 CCC (3d) 126, that in order for a game to be considered one of pure skill, the average player must be able to exercise sufficient skill so as "to compensate for the other elements of the game that [are] wholly beyond the power of the player to influence."

Determining whether DFS is a game of pure skill, or of mixed chance and skill, or chance, may end up depending on the facts of particular cases. No doubt, in the event that prosecutions are launched against any DFS websites under Part VII of the Criminal Code, both the Crown and the accused will deploy expert evidence to demonstrate whether or not a participant in DFS can exercise sufficient skill, for example through the careful monitoring of sports statistics, to compensate for the other elements of fantasy sports, such as being reliant on the performance of others on a single day, namely sports players, that are wholly beyond the power of a participant to influence.

Regardless of whether DFS websites are offside or onside of Canada's gambling laws, in the era of the Internet it is not practical for the Crown to consider launching criminal prosecutions against the thousands of gambling services, many of them hosted on foreign servers outside Canada's jurisdiction, that are available to Canadians online.

This raises the question of whether a more appropriate approach would be to update Canada's gambling laws so as to regulate and tax such services and redirect some of the funds generated to public services, including those devoted to assisting Canadians that suffer from gambling addictions.

Stewart Cattroll is an associate at Tacit Law. His practice primarily focuses on communications, competition, commercial and employment law. He enjoys participating in traditional fantasy hockey.

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