Licensing case could hurt rotisserie sports

While names like Shaun Alexander and Clinton Portis trigger hot discussion in fantasy football draft rooms in the coming weeks, the issue of fantasy sports could also be a hot topic in courtrooms and the halls of Capitol Hill.

Of particular interest to all parties is the case between Major League Baseball Advanced Media and St. Louis-based CDM Sports, which centers on the issue of whether fantasy leagues must pay licensing fees for the rights to use player names and statistics.

Meanwhile, federal lawmakers are tackling the issue of online gambling, and have so far exempted fantasy leagues from an outright ban. But the effort has sparked a tense debate about whether fantasy games should be categorized as games of skill.

In the case of MLB vs. CDM, baseball officials have argued fantasy operators should not be able to make money on the names and statistics of players together without a license. CDM is suing on the grounds that the data is public information, and that all the company does is compile and deliver the information to users.

“There always has been a lot of uncertainty about whether you need a license to use basic information,” said Rudy Telscher, an attorney for CDM. “We think the court should rule that this is public information and that nobody can own it.”

The case is scheduled to go to trial Sept. 5, though a settlement could come earlier. And though the case involves MLB, other professional sports leagues, including the NFL and NBA, are likely waiting to see how they might be affected.

Football is by far the fantasy king, with 90 percent of all fantasy sports players participating in at least one football league. The majority of players use services from either the pro sports leagues or big companies like ESPN or Yahoo, which do pay the leagues for licenses. But more than 100 other fantasy providers either can’t or won’t pay for the licenses or have been denied a chance to buy licenses from the leagues. If CDM loses, all of the non-licensed companies could be forced out of business.

“It’s absolutely going to be seen as a precedent,” Telscher said. “If we lose, football might take a similar position. The reality is, this case likely determines it all.”

Estimates to the size of the fantasy sports industry vary, but most reports show at least 20 million people are involved in at least one league, with more than $4 billion spent annually. The majority of fantasy leagues are now organized and hosted on the Internet.

“This is, without a doubt, the watershed moment in this industry,” said Greg Ambrosius, editor of Fantasy Sports Magazine, and former president of the Fantasy Sports Trade Association. “This is that line in the sand.”

Ironically, while the CDM case could have an enormous impact on fantasy sports, a recent effort by Congress to curb online gambling appears to leave the industry untouched.

Earlier this month, the U.S. House of Representatives overwhelmingly passed a measure designed to make it illegal for banks and credit card companies to make payments to online gambling sites. But the legislation exempted several activities from scrutiny, including horse racing and fantasy sports.

Why the exemptions?

“It makes passage more likely,” said Michael McCann, an assistant professor of law at Mississippi College who specializes in sports law. “Most people like fantasy sports. It doesn’t have that moral stigma that betting does. Fantasy sports can be just as addictive, but there’s not as much outrage.”

Supporters of the exemption argue fantasy sports are considered games of skill, but that characterization has angered some fans of online poker, who have pushed for their own exemption on the grounds their game is equally independent of luck.

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