Daily Fantasy Sports Makes Last Pitch To Be Declared Legal In New York

Lower courts insist that DFS violates state's gambling laws
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It was years ago that daily fantasy sports won its lobbying effort across most of the U.S. to be seen as exempt from state gambling prohibitions, only to have the later legalization of sports betting render the issue moot in most cases.

But not in New York, where the state’s highest court reheard oral arguments on Tuesday over whether to overturn two lower-court rulings which found that state lawmakers overstepped their bounds in passing a law in 2016 to allow for daily fantasy sports. A previous ruling against the state in the “White v. Cuomo” case found that New York could decriminalize DFS, however, leaving a legal gray area within which DraftKings and FanDuel continue to operate in the state.

Tuesday’s arguments before the New York Court of Appeals were familiar ones, pitting opponents of legalized gambling expansion against state lawyers who want DFS companies left alone.

The core question remains: Is DFS predominantly a game of skill, or chance?

DFS players as general managers

An attorney for the state insisted on differentiating DFS from sports betting — notwithstanding the fact that the latter has been legal in the state at casinos since 2019 and, as of last month, also legal for mobile wagers.

The argument is that sports betting is passive, such as wagering on whether Yankees outfielder Aaron Judge will hit a home run on a given night, and whether his team will win its game against the rival Red Sox.

“That result is completely outside of the control of the parties to the bet, so it is gambling, as sports betting,” the state’s attorney said.

But DFS, went the argument, is a skill-based competition in which each participant decides he or she “can out-general manager you.”

“There is a difference between what a general manager does and what a sports bettor does,” the state’s attorney said. “The general manager identifies undervalued players within the confines of a salary cap. You can’t just pick an All-Star team. Commodities trading is more influenced by chance than fantasy sports is.”

But the stock market, it was conceded, was made exempt from gambling prohibitions in the late 1800s — just as poker was found in that era to be a game of chance. (The state’s attorney called that ruling “a historical anomaly.”)

Attorney Jeffrey Sherrin, arguing for the plaintiffs, attempted to separate DFS from fund managers by curiously declaring, “No one has a job betting on fantasy sports.”

In rebuttal, the state’s attorney said, “For every analogy [Sherrin] can draw to sports betting, I can draw an analogy to what general managers do — and if it’s a judgment call, tie goes to the legislature.”

Other details from oral arguments

The elephants not in the room — which greatly enhance the state’s case for the game-of-skill claim, while being an awkward fact for DFS companies seeking to attract casual players — are the studies finding that as few as 1% of DFS players are capable of winning as much as 90% of the money.

One judge challenged the state’s argument by noting a NASCAR daily fantasy sports event from the previous weekend, where entrants picked a number of drivers against a salary cap. The claim was that such a contest seems more like luck than a game of chance.

The state’s attorney instantly decided that was not a hill to die on, conceding that “that contest may ultimately be found not to qualify” as a game of skill.

But is that reason enough to find that no DFS contests would qualify?

The whole “reargument” appears to have come about because of a 3-3 split in the case last fall. Based on the slant to various judges’ questions on Tuesday, it seems the case is headed to another close vote this time around.

One judge seemed unimpressed by the plaintiffs’ failure to cite a single study in their filings to buttress the argument that DFS was a game of chance. Meanwhile, the state’s attorney won the “best line” contest by pointing out that chess — legal under New York law — “is a fantasy battle between feudal kingdoms.”

Image: Shutterstock

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