The saga surrounding daily fantasy sports ("DFS") in New York has taken many twists and turns in the last several years. The most recent episode occurred last week as the New York Court of Appeals, the highest court in the State, held oral argument concerning the constitutionality of the Legislature's acts that legalized DFS in New York.
What did the oral arguments foreshadow about the future of fantasy sports in New York?
Readers will recall our chronicling the fraught journey of fantasy sports through New York's legal system. In 2016, the State Legislature enacted legislation to permit DFS contests in which consumers pay an entry fee to the DFS provider, select rosters of real-world athletes, and compete against other consumers for cash prizes based on the performances of the chosen athletes in real, live sporting events. That law also declared that DFS does not constitute gambling as defined under the State Penal Law, thereby eliminating any criminal penalties that otherwise would jeopardize the operation of DFS contests in the State.
Shortly thereafter, a lawsuit was filed alleging that the legislation violated the State Constitution's prohibition against lotteries, pool-selling, book-making, or any other kind of gambling, except for state-run lotteries, pari-mutual betting on horse races, and State authorized casinos. The trial court agreed with the plaintiffs that the statutory authorization of DFS violated the constitutional ban on gambling, finding that DFS "involves, to a material degree, an element of chance, as the participants win or lose based on the actual statistical performance of groups of selected athletes in future events not under the contestants' . . . control or influence."
Subsequently, the first appellate court to revisit this issue largely upheld the trial court's decision, finding that "although participants in [DFS] contests may use their skill in selecting teams, they cannot control how the athletes on their [DFS] teams will perform in the real-world sporting events . . . . In other words, the skill level of a[] [DFS] contest cannot eliminate or outweigh the material . . . role of chance in [DFS] contests."
DFS did not receive a warm welcome at the Court of Appeals either. There, during oral arguments, the judges were largely hostile to the State's position that DFS is not gambling, signaling that DFS could only be legalized through a legitimate amendment to the State's constitutional prohibition. Many of the judges used various references to other forms of gambling as analogies for DFS contests: (1) Being dealt a royal flush in poker as being the same as having Tom Brady on one's fantasy team; and (2) Wagering on a team to win a game being no different than profiting from whether a player on that team catches a certain number of passes in that game.
The Court of Appeals typically issues rulings between 6-8 weeks after argument. While the prospects for DFS in New York look dim, interested parties will ultimately have to monitor imminent developments to learn of the next chapter in this ongoing saga.
Retaining a Fantasy Sports Lawyer
Fantasy sports operators have been allowed to continue offering their contests while cases wind their way through New York's legal system. The legal landscape for such operators, however, may be on the verge of dramatic change. The importance of working closely with a DFS lawyer cannot be understated. A fantasy sports lawyer can assist in determining relative risk levels associated with certain operations by evaluating applicable statutes, case law, and attorney general opinions. Operators in this space are encouraged to stay ahead of regulatory and legal developments by retaining and working closely with experienced fantasy sports lawyers.
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