NY Court of Appeals rules fantasy sports are constitutional

| By Daniel O'Boyle
New York’s Court of Appeals has ruled that fantasy sports games are not unconstitutional gambling products, in response to a legal challenge that began in 2016.
New York City

Paid fantasy sports games were legalised in New York in 2016, after the state’s attorney-general had taken action against FanDuel and DraftKings for unlawful gambling in 2016.

As New York’s constitution prohibited gambling apart from certain specific exceptions such as tribal gaming, the law said that these games are “not prohibited gambling activities because contestants use significant skill to select their rosters”.

However, soon afterwards, a group of four individuals who all said they had been affected by gambling harm launched a lawsuit against then-governor Andrew Cuomo and the New York State Gaming Commission challenging the law. The plaintiffs called for a permanent injunction to block the law from coming into effect, and a declaration that it was constitutionally invalid.

The case first went to the state Supreme Court, which said that these contests would indeed be considered gambling under the state’s Penal Law. However, it went on to say that the legislature “acted within constitutional bounds to exclude IFS contests from the scope of the Penal Law provisions regarding gambling”.

Following appeal, the Appellate Division came to a similar conclusion.

The plaintiffs then appealed to the New York Court of Appeal, questioning whether the legislature may simply declare certain activities to not be gambling.

The Court of Appeal had a different interpretation of whether fantasy contests were gambling, arguing that the two prior judgements’ claims on the matter had been “in error”.

It argued that determining if a game was gambling under the constitution, it must determine if chance was the “dominating” factor. On the other hand, in the definition of gambling under the Penal Code, chance only needs to affect the game to a “material degree”.

As a result, it said, that “the legislature’s factual determination that [fantasy sports] contests are a game of “skill” not of “chance” – and therefore are not ‘gambling’ – has resounding support”.

The court noted that skilled players consistently win fantasy sports events and that rosters chosen by skilled players outperformed randomly chosen rosters 80% of the time.

As a result, it said, fantasy contests do not meet the constitutional definition of gambling.

“Participants draw from their knowledge of the relevant sport, player performance and histories, offensive and defensive strengths of players and teams, team schedules, coaching strategies, how certain players on opposing teams perform against each other, statistics, strategy and the fantasy scoring system in order to exercise considerable judgment in selecting virtual players for their rosters. Although participants are not able to influence athlete performance in actual sporting events, their skill nevertheless plays a substantial role in the outcome.”

Since the case began,the framework of legal gambling in New York has changed significantly. Retail sports betting first launched in 2019, before the launch of mobile sports betting earlier this year, with nine permitted operators.

In addition, the state is currently working to issue licences to operate three casinos in the downstate region of New York, which includes New York City and the surrounding area.

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