Daily Fantasy Sports Is Legal In New York, Judges Clarify

4-3 Appeals Court vote hinged on 'gambling' being undefined by the state
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The cloud under which daily fantasy sports has operated in New York state for more than six years was finally lifted on Tuesday when the state’s Court of Appeals — the preeminent court in the state — ruled by a 4-3 vote that DFS (referred to as “interactive fantasy sports, or “IFS,” throughout the ruling) was legal under the state Constitution.

“Today, we clarify that the historic prohibition on ‘gambling’ … does not encompass skillbased competitions in which participants who exercise substantial influence over the outcome of the contest are awarded predetermined fixed prizes by a neutral operator,” wrote Chief Judge Janet DiFiore for the majority. “Because ample support exists for the legislature’s determination that the [DFS] contests … are properly characterized as lawful skillbased competitions for prizes under our precedent, plaintiffs have not met their burden to demonstrate beyond a reasonable doubt that [DFS is] unconstitutional.”

Two lower-court rulings had found that a 2016 law which legalized daily fantasy sports was unconstitutional, although DraftKings and FanDuel have continued to operate in the state anyway.

Judge Rowan Wilson strongly disputed Tuesday’s ruling in his dissent.

“If people in New York want to allow interactive fantasy sports, they must vote for it,” he wrote. “The 1894 Convention anticipated that gambling companies like DraftKings and FanDuel would emerge, would create new and popular forms of gambling, and would engage in expensive campaigns to sway our legislature.

“What that Convention could not have anticipated is that, having squarely put the expansion of any form of gambling exclusively in the hands of the voters, our Court would defer to legislative ‘findings’ to strip voters of their rights under our Constitution. The tragedy of today’s decision is not the legalization of gambling; it is the usurpation of the constitutional process.”

“New York state is FanDuel’s home and our New York customers have enjoyed playing daily fantasy for years,” FanDuel spokesman Kevin Hennessy said in a statement. “We are pleased that New Yorkers will continue to have access to fantasy sports contests.”

Deference to legislature key

In ruling for the majority, Judge DiFiore wrote, “When a legislative enactment is challenged on constitutional grounds, there is both an exceedingly strong presumption of constitutionality and a presumption that the legislature has investigated for and found facts necessary to support the legislation.

“Thus, while the legislature may not circumvent the Constitution merely by declaring that an activity which unquestionably constitutes prohibited gambling should no longer be considered such, we must remain cognizant of the distribution of powers in our State government that render it improper for courts to lightly disregard the considered judgment of a legislative body that is also charged with a duty to uphold the Constitution.”

DiFiore added that a challenge for the panel was the fact that the term “gambling” has never been defined by the state.

“While the parties agree that the prohibition on gambling should be understood to prohibit games of chance and bets and wagers on contests of skill unless otherwise authorized, they dispute the contours of those categories and the proper classification of IFS contests,” she wrote. “Evidence presented to the legislature indicated that outcomes in IFS contests are predominantly based on skill. Studies showed that skilled players achieve significantly more success in IFS contests and that rosters of skilled human players were more successful in IFS contests than randomly generated lineups over 80% of the time.

“Contrary to the dissent’s contention, in clarifying the meaning of the term ‘gambling’ in the State Constitution in this manner, we do no disservice to our judicial role or the separation of powers doctrine. Indeed, it is the dissent who abdicates the judicial role, providing no discernible definition for the term ‘gambling.'”

More from the dissent

In his dissent, Judge Wilson wrote, “Since 1894, New York’s Constitution has prohibited ‘lotter[ies] . . . poolselling, bookmaking, or any other kind of gambling.’ Everyone knows that sports betting is gambling. Betting on how many touchdowns a particular player will score is gambling. The majority’s explanation of why something everyone knows is gambling is not actually gambling brings to mind a brief exchange in Casablanca:

“Captain Renault: This café is closed until further notice. Clear the room at once!
Rick: How can you close me up? On what grounds?
Captain Renault: I’m shocked, shocked to find that gambling is going on in here!
[A croupier hands Captain Renault a pile of money.]
Croupier: Your winnings, sir.
Captain Renault: Oh, thank you very much.

“Perhaps the majority is right that gambling does not today carry the same moral approbation it did in 1894; perhaps the plaintiffs are right that gambling addiction is a more severe problem now than then. Perhaps both are right. Those policy questions are immaterial here. Were there no constitutional prohibition on gambling, that policy dispute could be resolved through the legislative process. But because our Constitution prohibits any kind of gambling, the policy issues must be put to the voters of this state, in the form of a popular referendum to amend the Constitution (or via a constitutional convention).”

Wilson offered a New York state history lesson on public opposition to gambling that dated back to the early 1700s and, a bit later, objections to lotteries to raise funds for public projects such as canals. The state Constitution, Wilson noted, was amended in 1957 and 1975 to allow for games of chance such as bingo by charities, in 1966 to create a modern state lottery, and in 2013 to authorize up to seven commercial casinos across the state.

“Even if the amendments can be taken to show that the public’s views on gambling have changed, they underscore that the process for authorizing new forms of gambling is through a constitutional amendment approved by the people of the State,” Wilson wrote, while objecting to the premise of the “skill versus chance” test put forth by the majority.

The dissenter even threw in some modern-day NFL references:

“When the New York Giants drafted [quarterback] Daniel Jones sixth overall and signed him to a $25.6 million, four-year contract, they most certainly did so in relation to a professional sporting event. Although his future performance was not then knowable, the relation to a sporting event does not determine whether the Giants’ action was gambling under the Constitution (which it was not).

“Two things distinguish it from IFS: (1) The Giants have some ability to affect Jones’ future performance (which IFS bettors selecting him do not); and (2) we understand that entering into employment contracts is a socially desirable activity and not ‘gambling’ within the meaning of the Constitution, even though an employee’s future performance has an inherent measure of uncertainty.

“The majority attempts to distinguish ‘bets and wagers’ of gambling activities from lawful contests that award prizes to competitors — contests integral to the fabric of American social life, spanning the range from spelling bees to golf tournaments to televised game shows.’

“Leaving aside whether IFS is ‘integral to the fabric of American social life,’ I control my performance in a spelling bee. I control my performance in a golf tournament. I control my performance in a televised game show. I do not control Tom Brady’s performance in a football game.”

Photo: Danielle Parhizkaran/USA TODAY

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