New York ends DFS debacle with landmark ruling

New York’s Court of Appeals has ruled 4-3 in favor of determining daily fantasy sports (DFS) games to be “games of skill” rather than an illegal form of gambling in the Empire State.

The case centers on whether elements of chance supersede the elements of skill involved in fantasy sports contests, something which was ultimately dismissed by the majority of judges at the court.

New York’s state constitution has prohibited “lotter[ies] . . . poolselling, bookmaking, or any other kind of gambling” since 1894. Sports betting in the Empire State was only legalized following the repeal of PASPA in 2018.

In her concluding remarks, chief judge Janet DiFiore moved to end the dissent by delivering a binding legal opinion, rendering DFS contests constitutional under New York law.

“The prohibition on ‘gambling’ encompasses either the staking of value on a game in which the element of chance predominates over the element of skill, or the risking of value through bets or wagers on contests of skill where the pool of wagered value is awarded upon some future event outside the wagerer’s influence or control,” DiFiore wrote.

“However, games in which skill predominates over chance and skill-based competitions for predetermined prizes in which the participants have influence over the outcome do not constitute ‘gambling’,” the judge added.

The ruling perceptibly ends a six-year state of limbo on the DFS vertical, confusion which began in November 2015 when New York Attorney General Eric Schneiderman penned a letter to DraftKings and FanDuel ordering them to cease all online operations in the state.

Schneiderman asserted that “customers are clearly placing bets on events outside of their control or influence,” suggesting the top one percent of DFS users were claiming the vast majority of the winnings.

The letter triggered a bitter war of words between the DFS giants and the state, as well as non-profit organization “Stop Predatory Gambling”, a national group which seeks to limit commercial gambling in the US.

The group bankrolled a legal challenge against then New York Governor Andrew Cuomo, kicking off six years of back and forth which ultimately culminated in the Court of Appeals’ ruling.

DraftKings and FanDuel have operated DFS contests in the Empire State throughout the period, in direct challenge to the then Attorney General’s letter.

Schneiderman and the New York Attorney General’s office would later sue the DFS giants, claiming they were in “flagrant disregard” of New York’s constitution.

Despite the legal clarity, dissenting opinions were expressed by Court of Appeals judge Rowan Wilson, who asserted that the legality of DFS contests under the state constitution be put to a referendum.

“Everyone knows that sports betting is gambling. Betting on how many touchdowns a particular player will score is gambling. The defendants here agree,” Wilson wrote.

“Aggregating several bets involving different players into a point total that is pitted against point totals of other bettors does not transform gambling into something else.

“The great damage done by today’s decision is not the legalization of gambling (which has existed, in an illegal but mildly tolerated form throughout the state’s history) but the affront to the importance of our Constitution and the role of the courts – in particular this court — in upholding the Constitution and defending it from ordinary legislative incursion,” Wilson concluded.

In a statement, FanDuel spokesperson Kevin Hennessy welcomed the legal clarity afforded by the Court of Appeals’ ruling.

“New York state is FanDuel’s home and our New York customers have enjoyed playing daily fantasy for years.

“We are pleased that New Yorkers will continue to have access to fantasy sports contests,” Hennessy added.