By Alan Prendergast
By Michael Roberts
By Michael Roberts
By Amber Taufen
By Patricia Calhoun
By William Breathes
By Michael Roberts
By Melanie Asmar
This is no bluff. Chuck Humphrey swears it -- and his face is giving nothing away.
Even though the Lakewood attorney is the sole plaintiff in a New Jersey lawsuit claiming that online pay-to-play fantasy-sports competitions are actually illegal gambling, he's not some spoilsport out to rid the world of wagers. Humphrey's actually a poker player who has collected $50,000 of his own winnings over the years, financed one of the game's biggest tournaments, and was the first to make a business out of backing a "team" of poker players. Naturally, everyone's looking for his tell, assessing his motives and critiquing his every move -- starting with his timing.
Humphrey filed the lawsuit in June while Congress was considering a law cracking down on online gambling in general, and poker in particular. Internet gambling has always been illegal in this country, but the Unlawful Internet Gambling Enforcement Act threatened to make the regulations enforceable by making it illegal for U.S. banking institutions to process payments to online gambling sites based in other countries. The bill -- which became law in October -- exempted fantasy-sports games such as those put on by ESPN, CBS and the Sporting News, the named defendants in Humphrey's suit.
"Is he merely attempting to point out the absurdity of the [law]? Or is he envious that fantasy football won a carve-out from the ban that poker didn't get?" asks journalist and blogger Radley Balko. "Put another way, is this an attempt to challenge anti-gambling legislation, or is it more, 'If I can't have fun, then I'll make sure nobody can?'"
Humphrey says it's neither. "Look," he tells his detractors, "I'm doing this because I think I've stumbled onto something where maybe I can make a lot of money. It's that simpleI'm in it for the money."
And as it turns out, there's a lot of money to be made by this beloved American pastime. Fantasy sports got its start in 1980, when journalist Daniel Okrent asked his friends and co-workers to try out a team-management game he'd invented called Rotisserie Baseball. Each player was the manager of his own fantasy team, and each team used a $260 budget to draft 23 actual Major League Baseball players. The teams then competed against each other over the course of the full MLB season based on their real-life players' performance in eight categories.
Today more than fifteen million people play fantasy sports online, aided by up-to-the-minute stats, player evaluations and injury reports. Not everybody who uses the fantasy sites competes for prizes, but those who do pay an estimated $1.5 billion to play annually -- 40 to 60 percent of which the games' host companies keep as revenue. That's the pot Humphrey's betting to win.
His lawsuit is based on the obscure gambling-loss recovery statutes of eight states, including New Jersey but not Colorado. These measures stem from English gambling law, codified in the 1710 Statute of Anne and imported to the U.S. as common law. They include a provision allowing an individual to sue to recover someone else's gambling losses from an illegal operation, usually splitting the award with the state or other jurisdiction. If the court decides that these 300-year-old laws are applicable, it will then also have to decide whether fantasy sports constitutes illegal gambling. Those decisions may come soon, as the defendants now have motions to dismiss pending before the judge.
"It's probably a long shot," Humphrey says of his suit. "I'm up against tough, tough odds. We've got 20 million Americans that do this, and since these gambling recovery laws are seldom used, one would think the court would want to strain to try to come out against me."
This case is unlike anything Humphrey's ever done before. But then again, his entire forty-year career has been an eclectic entrepreneurial ride. If there's one thing he's done consistently, it's make money. Humphrey grew up in Detroit, and after law school spent ten years as a securities lawyer in Houston. He did tax-shelter work for the oil and gas industry and was president of Partners Oil Company for a year.
He came to Denver for a job at the new branch of the Kirkland and Ellis law firm in the early '80s, eventually leaving to partner with future Frontier founder Sam Addoms in a venture-capital business. He and Addoms went their separate ways in 1989, each running a company that had once been a client. Humphrey's business originated the large-scale video-store concept, and he wound up selling it to Blockbuster. "I took my ill-gotten gains and retired for the second or third time," he says.
By the mid-'90s, Humphrey was living in Palm Desert, California, and visiting casinos. It wasn't long before he started thinking about turning his hobby into a profit-maker. He wasn't good enough to make big money playing himself -- it took him ten years to win a total of $50,000 -- but he had the funds to invest in someone else's big idea. Through poker circles he met Mike Sexton, who was looking to finance the Tournament of Champions of Poker, which would be the game's most exclusive competition. Only those players who had won a major tournament would qualify. Humphrey put up the cash.
Around the same time, he created a team of poker players for whom he paid tournament entry fees in exchange for half their winnings. Team Pegasus, which eventually grew to twelve players, was a new twist on an old trade. "The idea of backing ten or twelve people, doing it on a fairly large scale, is something that hadn't been done," Humphrey says. "And doing it with written contracts and accounting controls hadn't been done, either. Now other people do it."
After a few years of backing his players and following the poker circuit from his forty-foot RV, he realized he wasn't going to make any money on the Tournament of Champions unless he could attract sponsors. For the 2001-2002 tourney, he hired Steve Lipscomb to film the event and gave him the television rights. "Steve did a horribly bad job for me. I had a tremendous falling-out with him, and I wound up closing down the TOC," Humphrey says.
Meanwhile, Lipscomb went on that same year to found the World Poker Tour, which debuted on the Travel Channel in March 2003. He took Mike Sexton with him as host. "That was really the single thing that caused poker to boom -- the original season of the World Poker Tour," Humphrey says. "I've never made up with Lipscomb, although out of a sense of honesty, every once in a while I've written something that will support what he does. But I don't like him very much."
Humphrey was left to look for a new venture. He was already fielding frequent legal questions about gambling on a poker newsgroup he frequented, so he decided to make a business of it. He wasn't licensed to practice law in California -- and at age sixty, he wasn't anxious to sit for the bar again -- so he returned to Colorado to research and compile the gambling laws of all fifty states. It was during that process that he came across the gambling-loss recovery statutes and started thinking about using them for a fantasy-sports suit.
Humphrey was sure the contests were based more on chance than skill, which could qualify them as gambling if he could prove the entry fee was in fact a wager. He concedes that drafting a fantasy sports team has an element of skill, but only to an extent. The actual outcome depends on what the actual players do on the field. "The proof in the pudding is something like the New York Yankees," he says. "Lord knows Steinbrenner pays an awful lot of money to buy the biggest-name baseball players, but they don't always play well. They don't always win the World Series."
In its motion to dismiss, CBS Sportsline and the Sporting News argue that the "entry fee" their websites charge is not a bet or wager, but a fee for services, like those real-time stats. Since the game is a test of team-management skills, players devote an extraordinary amount of time to monitoring such information -- three hours per week on average. The companies accuse their assailant of having "picked the wrong forum in which to pursue his legislative agenda."
Any legislative ambitions Humphrey admits to harboring remain in the realm of poker. At the suggestion of a friend in the online poker industry, he's been outlining a means to prove that online poker is a game of skill, and it starts with hiring the math department of a major university to do a statistical analysis of player outcomes over time. Such a study could prove useful as a lobbying tool or as evidence in court.
Humphrey may just take that bet.