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New York Acting Supreme Court Justice Gerald W. Connolly has ruled that daily fantasy sports (DFS) contests count as gambling.
That’s not good news for the big DFS operators like FanDuel and DraftKings. New York’s population of around 19 million is a big market for them.
Technically, the judge has ruled that DFS is gambling according to the state constitution, and therefore the state legislature cannot pass laws to make it legal. But New York has legislated to make DFS legal.
Justice Connolly ruled that the element of luck in DFS contests was sufficient to classify the games as gambling under the constitutional definition.
But he then went on to rule that state legislators could determine to remove DFS from the list of activities classified as gambling.
DraftKings and FanDuel will carry on
That leaves the whole legal status of DFS up in the air. The operators can point to the statutes and claim quite legitimately that DFS is legal, and there’s a law that says so.
However, theoretically, opponents can challenge the law on constitutional grounds. The present case is brought by gambling opponents, including “Stop Predatory Gambling.”
Their lawyer, Neil Murray of the firm O’Connell and Aronowitz, explained:
“The plaintiffs seek to protect the public from predatory gambling consistent with the Constitution. They also intend to stop FanDuel, DraftKings and other internet gambling operators from exploiting the financially desperate and the addicted in New York.”
Stop Predatory Gambling has not finished with the legal process. The group will make further legal challenges, but that could take years.
Meanwhile, DraftKings and FanDuel will carry on as normal. Both produced similar statements on the decision:
FanDuel:
“The decision makes clear that the New York legislature’s decision to exclude fantasy contests from the definition of illegal gambling cannot be challenged in court. Accordingly, we will continue to offer fantasy sports to New Yorkers. We also believe in the benefits of regulation and will cooperate with efforts to permanently restore regulatory oversight.”
DraftKings:
“We are pleased that the court upheld the New York legislature’s decision to decriminalize daily fantasy sports contests and that DraftKings can continue to offer their services to players. We are continuing to study the court’s decision invalidating the regulatory structure and are committed to working with the legislature.”
There is no suggestion that players are themselves breaking the law while continuing to play at either site.
Legal background is checkered
DraftKings and FanDuel have both exited the New York market in the past.
In 2015, Attorney General Eric Schneiderman sent both companies cease-and-desist orders. He claimed that DFS was gambling under New York law.
The state Supreme Court rejected a legal challenge by FanDuel and DraftKings, and the two stopped offering DFS in the state.
In the same year, the legislature passed a new law which explicitly made DFS legal. The law stated that:
“Interactive fantasy sports are not games of chance because they consist of fantasy or simulation sports games or contests in which the fantasy or simulation sports teams are selected based upon the skill and knowledge of the participants and not based on the current membership of an actual team that is a member of an amateur or professional sports organization.”
The current court decision disagrees with the politicians on that definition.
An appeal is inevitable, and in any case, there must be further legal process before the state can order FanDuel and DraftKings to again cease and desist.
Sports betting is on New York’s horizon
Meanwhile, New York is pressing ahead with a bill to legalize sports betting, and it’s looking promising for 2019. DraftKings and FanDuel are both licensed in New Jersey to provide NJ sports betting and they will certainly want to do the same in New York.
In 2016, AG Schneiderman fined the two companies $6 million each for “false and deceptive” advertising claims.
Until the legal issues are resolved, players can rely on DraftKings and FanDuel to be as compliant as possible. Neither will risk jeopardizing their regulatory reputation any further.
