The law, which Congress passed in July 2006, prohibits gambling businesses from accepting bets or wagers over the Internet, effectively shutting down online poker and sports betting in the United States.
It might have had a similar effect on fantasy sports if not for the section carved out specifically to make them legal. The law permits “participation in any fantasy or simulation sports game or educational game or contest in which (if the game or contest involves a team or teams) no fantasy or simulation team is based on the current membership of an actual team that is a member of an amateur or professional sports organization.”
The section on fantasy sports included three conditions. All prizes must be established before the contest and not determined by the number of participants. The outcome of the contest must reflect “the relative knowledge and skill of the participants” and be determined by statistical results. The contest cannot be based on the score, point spread or any performance of a single real team or an individual athlete in a single real sporting event.
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“The carve-out, as I recall, was considered a kind of footnote,” Jim Leach, the now-retired Republican congressman from Iowa who co-authored the bill, said in an e-mail. “It was never much discussed during consideration of UIGEA because it was considered like horse racing, already part of the American betting scene.”
Having capitalized for years on the popularity of fantasy sports, sports leagues helped ensure they wouldn’t perish. MLB specifically lobbied for the fantasy carve-out. In a letter dated Feb. 1, 2006, the top lawyers from the NCAA, NFL, NBA, NHL and MLB asked members of Congress to co-sponsor UIGEA, which included the fantasy carve-out.