New York court rules DFS constitutes illegal gambling in landmark case

Daily Fantasy Sports (DFS) operators DraftKings and FanDuel could be forced to discontinue operating DFS in New York long-term after a New York judge upheld a decision that ruled DFS was unconstitutional.

The New York Supreme Court agreed with a 2018 decision which said the state had acted unlawfully in expanding state gambling laws to include so-called interactive fantasy sports (IFS) in 2016.

At the time, IFS contests were classified by the state as games of skill rather than games of chance under article 14 of the New York state Racing, Pari-Mutuel Wagering and Breeding Law.

Its rationale for this change was that most DFS teams are selected based upon the skill and knowledge of the participants rather than at random. Under this amendment, IFS was deemed not to be classified as gambling.

However, under New York state law, all changes to gambling laws must be put to public vote, as provided for under the state’s constitution. Gambling activities are deemed unconstitutional until the state amends the constitution to include them.

DFS operators DraftKings and FanDuel both contested the case and are expected to do so again, allowing them to operate as normal in the short-term at least.

In 2018, Acting Justice Gerald W. Connolly found that IFS contests were not games of skill and should be included within the definition of gambling. As such the change in law allowing IFS was deemed invalid.