A district court in California dealt a blow to FanDuel, DraftKings and other DFS operators last week when it held that the payment of entry fees to enter daily fantasy horse racing contests that are returned to winners as cash prizes constituted a wager.

The court was handing down a preliminary ruling in a suit originally filed in December 2015 by racetrack and wagering business the Stronach Group against Kentucky-based Horse Racing Labs, LLC, operator of the Derby Wars website.

Derby Wars was providing free and pay-to-play contests, with points accumulated based on the performance of horses in real races and their associated pari mutuel returns.

Attorneys for Derby Wars had argued the contests were not wagers, but contests as defined under the California Business and Professions Code as: “Any game, contest…or plan that holds out or offers to prospective participants the opportunity to receive or compete for gifts, prizes, or gratuities as determined by skill or any combination of chance and skill and that is, or in whole or in part may be, conditioned upon the payment of consideration.”

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