Reverses two lower courts rulings

New York Court of Appeals deems Daily Fantasy Sports legal, affirms constitutionality

Reading time 2:32 min

A New York court has affirmed the constitutionality of Daily Fantasy Sports. Fantasy sports leagues that award prizes to participants have been deemed sufficiently skill-based, meaning they won’t be banned under state anti-gambling laws. The ruling is good news for operators such as FanDuel and DraftKings, which will be able to keep offering DFS in the Empire State.

The state’s high court decision comes after two lower courts sided with an anti-gambling group that claimed a 2016 New York law allowing DFS contests was unconstitutional: the lower courts ruled that the DFS did indeed violate a prohibition on gambling at the time of their decisions. However, the appeal strikes those rulings down.

According to what the New York Court of Appeals wrote on Tuesday in its majority opinion, interactive fantasy sports contests “are neither games of chance, nor bets or wagers on sporting events” but “independent contests of skill over which the participants exert influence,” reports Bloomberg.

The state, which dropped lawsuits against fantasy gaming giants FanDuel and DraftKings after the 2016 law to legalize DFS passed, soon after decided to appeal the lower courts' rulings. By a 4-3 margin, the New York Court of Appeals has now ruled that DFS are “lawful skill-based competitions for prizes” under state precedents.

According to the ruling, success in fantasy contests is “relative,” measured only by the quantity and quality “of skill exercised” by other participants. The court found that attempts to portray those contests as “unlawful gambling” simply because they relate to professional sporting events are “unavailing.”

In his dissenting opinion, Judge J. Wilson disagreed with this line of reasoning, arguing that the state constitution treats fantasy sports no differently than other games of chance, such as poker or blackjack, which remain illegal, further reports the cited source.

“The prohibition on gambling is broad and the definition arises not from any relative measure of chance or skill, but from the common understanding of what types of activities constitute gambling,” Wilson wrote. “Players skilled at counting cards are better able to win at blackjack than those who are unskilled, but that does not exempt blackjack, if played for money, from the prohibition on gambling.”

But even if the voting was divided, the Court of Appeals majorly agreed on the legality of these games. Members of the court took into account arguments laid out by New York lawmakers for the 2016 law, which specifically excluded fantasy sports from the penal code definition of gambling.

“Evidence presented to the legislature indicated that outcomes in contests are predominantly based on skill,” wrote Chief Judge Janet DiFiore. “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.”

State Senate Gaming Committee Chair Joe Addabbo celebrated the ruling, claiming it is good news for the state, which collects revenue on DFS. However, numbers thus far have not been as good as expected, a situation he believes could now change since operators were tentative with continued litigation.

New York Senator Joe Addabbo

"They didn't know whether to advertise, market more money, invest more money in marketing. The New Yorkers I spoke to were a little apprehensive about what's going on. You know, can we, can't we? They've seen the proliferation of ads for mobile sports betting but they saw no ads anymore for fantasy sports," Addabbo said, according to Spectrum News.

Daily fantasy sports were allowed while the case went through the judicial system, with most DFS companies remaining in the business despite the previous rulings. The new decision is in line with other states, such as Florida and Louisiana, in which fantasy sports also survived constitutional challenges to their legality.

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