In a decision released today by the Supreme Court, Appellate Division (New York's intermediate appellate court) in White v. Cuomo, the Appellate Division concluded that New York's daily fantasy sports authorization law is unconstitutional because DFS meets the definition of gambling under New York law. As a result, according to the Court, a constitutional amendment would be required in order to authorize a form of gambling. The 4-1 decision will in all likelihood be appealed to New York's Court of Appeals, and it is likely that the decision will be stayed and have no immediate effect. The long range consequences for DFS in New York, though, are far less certain.
In August 2016 the New York Legislature passed a statute regulating DFS operators in the state. The statute was challenged, alleging that because DFS is a form of gambling, the Legislature could not authorize it without a constitutional amendment. The trial court agreed. On appeal, the Appellate Division first noted that although statutes are presumed to be constitutional, if the state constitution prohibits the enactment of a law then the enactment is per se unconstitutional. The state constitution provides that no "lottery tickets, pool-selling, book-making, or any other kind of gambling" may be authorized by the Legislature (with limited exceptions).
In analyzing New York law, the court concluded that an event constitutes a contest of chance (rather than skill) if a material element of the determination of the outcome is based on chance. The court concluded that although skill is an element in DFS, chance is a material element because "player injury or illness, unexpected weather conditions, poor officiating" or other factors based on chance come into play and even the greatest skill cannot eliminate the material role chance plays. As a result, the court concluded that DFS meets the definition of gambling under New York law and, therefore, without a constitutional amendment, cannot be authorized by the Legislature.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.