## Facts

- Charles E. Humphrey, Jr. filed a putative qui tam action under gambling-loss statutes of multiple jurisdictions seeking to recover alleged “losses” of participants in pay-to-play online fantasy sports leagues.
- Defendants operated online fantasy sports leagues in which participants paid a fixed entry fee to select and manage teams of real professional athletes.
- Contest performance was based on athletes’ real-world statistical results, and participants could make strategic decisions (e.g., trades and lineup changes).
- In return for the fee, defendants provided services including statistic tracking, standings, and analytical tools and information about players and teams.
- Prizes were announced in fixed amounts before each league began and did not vary based on the number of entrants or total entry fees.
- Defendants did not compete for the prizes and were indifferent to which participants won.
- Humphrey alleged the entry fees were wagers, outcomes depended on chance, and the contests therefore constituted illegal gambling that triggered statutory loss-recovery remedies.

## Issues

1. Whether a fixed entry fee paid to participate in an online fantasy sports contest constitutes “wagering” or “betting” under state gambling-loss (qui tam) statutes.
2. Whether participants who fail to win prizes are statutory “losers,” and whether fantasy contest operators are statutory “winners,” as required for recovery under those penal statutes.
3. Whether the complaint pleaded the specific factual predicates required by gambling-loss statutes (including identification of losing gamblers and amounts lost).
4. Whether federal and other legal context concerning fantasy sports contests supported treating the challenged entry fees and prize structures as non-wagering activity.

## Decision

- The district court granted defendants’ Rule 12(b)(6) motions and dismissed the complaint.
- The court held that participants did not sustain gambling losses within the meaning of the cited gambling-loss statutes because entry fees were paid in exchange for services and the opportunity to compete.
- The court held that defendants were not statutory “winners” because they did not compete for prizes and their revenues were not contingent on any participant’s contest outcome.
- The court independently held that the complaint failed to plead required specific facts demanded by strictly construed penal gambling-loss statutes (including particular losers and amounts of losses).

## Legal Principles

- A fixed entry fee paid for participation in a contest, coupled with receipt of defined services and a chance to compete for predetermined prizes, is generally not treated as a wager for purposes of gambling-loss recovery statutes.
- Gambling-loss qui tam statutes are penal and are strictly construed; a plaintiff must plead the statutory elements with specificity, including the identities of “losers,” the amounts “lost,” and the corresponding statutory “winners.”
- A promoter or operator that does not compete for prizes and whose compensation is not tied to any participant’s winning or losing does not fit the statutory “winner” role required by gambling-loss recovery schemes.
- The presence of uncontrollable contingencies affecting results does not, by itself, convert a competitive activity involving participant strategy and decision-making into wagering for purposes of these loss-recovery statutes.

## Conclusion

The court dismissed the multi-jurisdiction gambling-loss qui tam suit, ruling that pay-to-play fantasy sports entry fees functioned as payments for services and participation in a contest with fixed prizes, not wagers creating statutory “losers” and “winners,” and that the complaint also failed to meet strict pleading requirements applicable to penal gambling-loss statutes.


Humphrey v. Viacom, Inc., No. 06-2768, 2007 WL 1797648 (D.N.J. June 19, 2007)