Fantasy Sports Operators Continue To Face Challenging Questions In COVID-19 Season

Major League Baseball, the National Basketball Association, and the National Hockey League are all back. But with a number of players already testing positive for Covid-19, the questions about how to conduct business during a global health pandemic continue to cause concern for real-world and fantasy sports alike.

While the challenges facing real-world sports are health-related and serious, the issues facing the commercial fantasy sports industry are primarily related to determining contest winners and allocating economic duties and rights.

First, fantasy sports operators will continue to need to address how to handle league payouts if one or more of the restarted real-world sports do not complete their 2020 season because of a Covid-19 outbreak among players. This question specifically pertains to whether fantasy sports owners should be paid out as winners based on current fantasy league standings at the time the season is stopped, or whether all entry fees should simply be refunded. This may theoretically present an issue not only for regular-season baseball leagues but also for playoff-format basketball and hockey leagues, which, in recent years, have grown in popularity.

In addition, one of the issues that was not considered as recently as last week when the Major League Baseball season was restarted was what to do if some, but not all, professional teams in a league need to stop play. But, with more than eleven players on the real-world Miami Marlins having tested positive for Covid-19, fantasy sports websites need a clearly articulated policy on how, if at all, they will pay out winnings if a given league ends the season for a certain number of teams early.

Meanwhile, yet another legal issue that fantasy sports operators will need to consider is who will bear the financial risk between them and statistical providers if the season is stopped because of Covid-19. Most statistical providers include language in their standard contracts that pertains to seasons that never happen because of a strike or other force of g-d. But not every contract between a fantasy sports operator and a statistical provider has language that references a season stoppage because of a pandemic. In addition, many such contracts do not address the diminution in value, if any, if a league reduces its number of active teams and thus the statistical provider is accumulating and disseminating statistics based on a lesser number of real-world teams.

For these reasons, it would be wise for fantasy sports operators to review their rules, terms and conditions, and third-party contracts as they resume efforts toward regular business operations. While some of these issues such as contract review may require the attentive eye of an attorneys, others perhaps could be reasonably addressed by a company’s longstanding business operations team.

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Marc Edelman (Marc@MarcEdelman.com) is a Professor of Law at Baruch College’s Zicklin School of Business and the founder of Edelman Law. He is the Indiana Law Journal author of “Regulating Fantasy Sports,” which is cited by the Illinois Supreme Court in Dew-Becker v. Wu.