Lawsuit That Threatens Legality Of Paid DFS Contests In New York In Its Final Stages

Written By Derek Helling on February 9, 2022 - Last Updated on June 8, 2022
Legality Of Paid DFS Contests In It's Final Stages

If a lawsuit concerning the legality of New York DFS is successful, players in the Empire State might have to go back to the days of running their own spreadsheets and collecting their own entry fees if they want to hold the contests for money.

Either way, the final verdict on the matter should come soon.

Oral arguments in the case before the state’s Supreme Court took place Tuesday. Right now, it’s difficult to ascertain which way the justices might be leaning as a group.

That means some irony is possible for the gambling industry in NY.

The tenuous legal state of New York DFS

This story goes back to 2016, when the state enacted a law regulating daily fantasy sports contests with paid entries awarding cash prizes.

Not long after that law took effect, this lawsuit was filed. Its challenge is not on the merits of DFS itself but the process in which it became a regulated activity.

The lawsuit argues that these paid DFS contests are a form of gambling. The NY constitution reserves the right to define legal gambling for the people. As a form of gambling, then, the legislature’s action is null without voter approval.

For that reason, the complaint continues, the only proper method to include these contests in the landscape of legal gambling in NY is with an amendment to the constitution.

The same path opened the door to New York for commercial casinos and NY sports betting (pending repeal of federal law that happened in December of 2018) in 2013.

Lower courts have agreed with the plaintiffs. In October, a six-member panel of the NY Supreme Court reached a deadlock on the issue. Now, the full seven-member slate of justices will have the final word in the matter.

So, what’s possible and what’s likely? Reading the room during Tuesday’s oral arguments gives some insight into the answers to those questions.

Will the justices overturn the lower courts’ decisions?

It seems possible. One of the justices, Judge Hector LaSalle, posed a line of questioning that seems favorable to such a ruling.

LaSalle questioned counsel for the plaintiff about whether the burden was on them to prove that the 2016 law was unconstitutional rather than the burden being on the state to prove its fitness.

Two of the justices seem inclined to agree with the lower courts. There are also three justices who seem more likely than not to want to overturn the prior decisions.

Another has kept her sentiments close to the vest. That would make LaSalle a potential swing vote.

If that does play out, then companies like DraftKings and FanDuel can operate as they have been.

If LaSalle backtracks and Justice Shirley Troutman, the silent party thus far, sides with the justices who want to uphold the lower courts’ rulings, then literally all bets could be off.

The legislature would have to go through the process of drafting an amendment to renew the games’ regulatory system. The measure would have to pass through both chambers with a supermajority.

Then it would need a simple majority of approval from the state’s voters. That would take approximately two years.

The great irony could be that in a state that just fired up its online legal sports betting market, online DFS games for money would become illegal.

It’s looking like that might not be the case, but as anyone who has played DFS games can tell you, it isn’t over until the clock has fully run out.

Photo by TierneyMJ / Shutterstock.com
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Derek Helling

Derek Helling is a lead writer for PlayUSA. Helling focuses on breaking news, including legislation and litigation in the gaming industry. He enjoys reading hundreds of pages of a gambling bill or lawsuit for his audience. Helling completed his journalism degree at the University of Iowa.

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