Is Your March Madness Tournament Pool Illegal?

Right now, a cultural phenomenon is sweeping through the country – March Madness. The NCAA tournament causes such a nationwide buzz each year that even President Obama has picked out his tournament bracket.

As remaining teams dance their way to the Final Four this April 2, you might be surprised to hear that your March Madness Tournament pool is actually illegal. Although the NCAA encourages fans to fill out brackets for the fun of the game, it considers sports betting or wagering a serious crime and opposes even small-dollar bracket office pools. Depending on the size of the pot, the use of the Internet, and whether you’re placing bets through a business, your March Madness bracket pool could be illegal under four different federal laws.

The first is the Interstate Wire Act of 1961, which disallows the business of betting or wagers, knowingly using a wire communication for the transmission of bets or wagers, or transmitting information to assist in the placing of bets or wagers on any sporting event or contest.[1] The definition of “wire communication” includes those that occur via the Internet. This emphasis would place NCAA pools that collect entry fees and pay prize money via online websites such as LeagueSafe under the purview of the Act. Although social conversation between friends who discuss their opinions as to the outcome of sporting events are not prohibited by the Act,[2] wagers among friends are not excluded from the Act if any party to the wager is engaged in the business of placing bets and wagers.[3][4]

Similarly, the Illegal Gambling Business Act penalizes whoever “conducts, finances, manages, supervises, directs, or owns part or all of an illegal gambling business.”[5] In one hand, the Illegal Gambling Act is broader than the Wire Act by prohibiting gambling businesses regardless of any Internet operation. On the other, the Gambling Business Act only targets large illegal gambling activities, and exempts gambling activities that produce less than $2,000 in daily gross revenues.[6] This is probably good news for a small-scale March Madness pool among friends.

March Madness bracket pool participants should also be aware of the Professional and Amateur Sports Protection Act (“PASPA”).[7] Passed in 1992, PASPA bans all but a handful of states from having legalized sports betting. In states other than Nevada, Montana, Oregon, and Delaware – the four exempt states that previously authorized government sponsored sports gambling – the broad reach of PASPA makes it illegal for any person to “sponsor, operate, advertise, or promote … a lottery, sweepstakes, or other betting, gambling, or wagering scheme based, directly or indirectly, on one or more competitive games in which amateur or professional athletes participate, or are intended to participate, or on one or more performances of such athletes in such games.”[8] Although the original intent of the legislation was to curb sports betting and limit its availability to gamblers in a regulated setting, modern day bettors have been enabled to place bets from anywhere by the vast reach of the Internet. Critics argue that PASPA has failed to accomplish its goals and instead supports a shadow economy of illegal sports gambling.[9] Despite this criticism, PASPA appears to prohibit March Madness pools regardless of the size of the pool or the use of the Internet.

Finally, the Uniform Internet Gambling Enforcement Act (“UIGEA”) is probably the legislation that does the most work in regulating online gambling today.[10] Passed in 2006, UIGEA makes it illegal for those “engaged in the business of betting or wagering” to “knowingly accept” funds in connection with the participation of another person in unlawful Internet gambling.[11] There is a key exemption under the UIGEA that provides a safe-harbor for fantasy sports games that meet three conditions: (1) value of the prizes is not determined by the number of participants in the game or the amount of fees paid by the participants; (2) all winning outcomes reflect the relative knowledge and skill of the participants and are determined predominantly by accumulated statistical results of the performance of individuals . . . in multiple real-world sporting events; and (3) no winning outcome is based on the outcome of the score of games or on the single performance of an individual athlete in a single, real-world event.[12] Earlier last year, Uniform Internet Gambling Enforcement Act was used to stop two large fantasy sports websites – DraftKings and FanDuel – from operating in New York, when the New York Attorney General issued a cease-and-desist order on the premise that those fantasy sports games involved more chance than skill. Similarly, the exemption likely does not apply to March Madness contests given that participants are required to select the winners of actual games and winning outcome is based on the result of the NCAA tournament.

In the face of four federal laws prohibiting March Madness bracket pools, what’s a college basketball fan to do? Following the advice of the NCAA, simply filling out a bracket without placing any bets will leave you in the clear. But for a charitable take, follow the lead of business and finance titans who will make a donation to the victor’s charity of choice.

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[1] 18 U.S.C § 1084

[2] United States v. Baborian, 528 F. Supp. 324 (D.R.I. 1981).

[3] United States v. Anderson, 542 F.2d 428 (7th Cir. 1976).

[4] Cohen v. United States, 378 F.2d 751 (9th Cir. 1967)

[5] 18 U.S.C § 1955

[6] Id.

[7] 28 U.S.C § 3701

[8] Id.

[9] See, Eric Meer, The Professional and Amateur Sports Protection Act (PASPA): A Bad Bet For The States, 2 UNLV Gaming L.J. 281 (2011)

[10] 31 U.S.C § 5362

[11] Unlawful Internet Gambling Enforcement Act of 2006, Fed. Deposit Insurance. Corp. available at https://www.fdic.gov/news/news/financial/2010/fil10035a.pdf (last visited Mar. 24, 2016)

[12]  Marc Edelman, A Short Treatise on Fantasy Sports and the Law: How America Regulates its New National Pastime, 3 Harv. J. Sports & Ent L. 1 (2012)

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