An appeals court in New York overturned most of a 2016 law that made fantasy sports games expressly legal in the state — a ruling that could threaten the ability for companies like DraftKings and FanDuel to operate there.
The New York Supreme Court’s Appellate Division determined that not only was that 2016 law unconstitutional, but that daily fantasy sports shouldn’t be exempted from the state penal code.
Second Court Loss for Fantasy Sports in New York
Thursday’s ruling was the latest twist in the legal battle that began shortly after Gov. Andrew Cuomo signed a bill taxing and regulating the fantasy sports industry, and declaring that DFS games did not constitute gambling.
Within months, four New York residents challenged that law. They claimed that the bill violated the New York constitution’s broad prohibition on gambling. Typically, gambling expansion in the Empire State requires a constitutional amendment, such as when the state authorized four upstate commercial casinos.
In 2018, Albany County Supreme Court Acting Justice Gerald Connolly agreed with that lawsuit in part, saying the bill violated the state constitution’s gambling ban. However, that ruling didn’t strike down the state legislature’s decision to exempt daily fantasy sports from the New York penal code.
That made Thursday’s ruling stronger than the 2018 decision, as it also struck down that exemption.
The Supreme Court found that daily fantasy sports games do involve a degree of skill. However, they ruled that the degree of chance involved is high enough to classify the games as gambling.
“Allowing the Legislature unfettered discretion to determine what is not gambling would render meaningless the constitutional prohibition on ‘lottery or the sale of lottery tickets, poolselling, book-making, or any other kind of gambling,’” the appellate decision read. “Thus, [DFS] contests are not excluded from the constitutional meaning of ‘gambling’ merely because the Legislature now says that it is so.”
Sites Expect to Remain Active During Appeal Process
Both FanDuel and DraftKings issued statements following the ruling expressing their belief that they can continue offering DFS contests in New York while the appeals process continues.
“We expect that there will be an appeal, and we’ll be able to continue to offer contests while that appeal is decided,” FanDuel wrote in its statement.
Litigator Rob Rosborough of NYSAppeals.com agreed with that sentiment, though he noted that the future was uncertain for fantasy sports companies in the state.
Much to unpack here, but most immediately, the State will undoubtedly appeal as of right to the NY Court of Appeals based on the substantial constitutional question, and will get an automatic stay of the order. So #DFS can continue in NY, for now. The future is much less certain.
— Rob Rosborough (@NYSAppeals) February 6, 2020
“The State will undoubtedly appeal as of [right now] to the NY Court of Appeals based on the substantial constitutional question, and will get an automatic stay of the order, Rosborough wrote. “So DFS can continue in NY, for now. The future is much less certain.”
Daily fantasy sports companies have fought legal and regulatory battles in many states as their industry grew over the past decade, with New York being perhaps the most challenging market of all. In 2015, New York attorney general Eric Schneiderman issued a cease-and-desist order to DraftKings and FanDuel to stop accepting play from residents in the state. The two companies later settled lawsuits with the attorney general’s office over false and deceptive advertising practices for $6 million each.