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New York Appeals Court Deems DFS Contests a Game of Skill
By Jeff Osienya Mar 24, 2022 LegalityAfter a lengthy fight in the legal corridors, the Empire State Court of Appeals has okayed DFS contests, reversing lower court rulings that considered the activity illegal. A new DFS bill has been tabled in the NY Senate following the win.After a years-long battle between legislators and proponents of Daily Fantasy Sports (DFS), the NY State Court of Appeals has finally put an end to the tussle over the legality of DFS. Thanks to a landmark ruling, DFS will no longer be grouped with games of chance prohibited in Article I, section 9 of the New York Constitution. The Empire State’s historic verdict came on March 22, 2022, after a 4-3 vote by judges, which categorized DFS contests as lawful games of skill.
During the announcement of the verdict, Chief Judge Janet DiFiore cited several studies that found that players who displayed some forms of skills were more likely to be successful in DFS contests. She also pointed out that rosters created by expert players had an 80% success rate compared to randomly generated lineups from sports betting. Moreover, the ruling established that DFS contests differed from games of chance since the process of picking out a fantasy team did not depend on the performance of real-life athletes. Instead, the selection is based on the players’ expertise and analytical skills.
The court was very clear about the distinction between DFS and illegal gambling activities, asserting that the former is a “permissible contest for prizes.” In contrast, the latter alludes to “gains and losses between the parties by betting.”
An Uphill Task for DFS Operators Since 2015
DFS contests are as popular as they are controversial and have been a subject of contention, especially in the Empire State. Even before the historic ruling, millions of residents in NY have been participating in DFS contests, accounting for over a tenth of the nationwide DFS revenue.
In 2015, then-Attorney General Eric Schneiderman declared it illegal, claiming that wagering on the sport is, in fact betting on a “contest of chance .”At the time, Schneiderman had stated that companies running DFS contests were violating New York gambling laws by engaging in illegal gambling and misleading unsuspecting consumers while causing social and economic harm to the community.
2016 was an about-turn for the state as daily fantasy sports were allowed after the then Governor, Andrew Cuomo, signed a bill that legalized regulated contests. Before this, the two biggest contributors to NY State DFS revenue – FanDuel and DraftKings, had pulled out of the state due to the uncertainty surrounding the industry in question. However, with the new law in place, the way had been cleared for the gaming operators, and they were back despite protests from critics who were adamant in their fight against daily fantasy sports.
Gov. Cuomo had justified his decision by stating that it struck a balance that would allow DFS contests to take place under the supervision of state regulators. The governor added that regulation would concurrently guarantee consumer protection rights and generate income for the State of New York. The decree had lobbyists celebrating and expressing relief that New Yorkers would finally be free to play DFS legally. However, the good news did not last long, as the 2016 legalization was marred with mass opposition. Legal challenges were filed by various parties to shut down DFS operations. However, the appellants were back to the courthouses defending the DFS industry with the help of research papers.
Efforts by DFS opposers seemed to bear fruit in 2018 as Trial Court Judge Gerald Connolly ruled that fantasy sports were unconstitutional to some extent. Come 2020; the NY Appellate Division ruled that DFS was entirely unconstitutional gambling. This was still in the White et al. v. Andrew Cuomo case, where the court argued that the element of chance in daily fantasy sports far outweighed skill. In its ruling, the court has also questioned the constitutionality of the 2016 Racing, Pari-Mutuel Wagering and Breeding Law art 14. This time around, the DFS industry was determined to come out at the top, so much so that its proponents had already prepared another appeal in case this one failed.
New DFS Regulation Bill Already Tabled in the New York Senate
Just a day after the March 22 court ruling, an amendment bill to introduce DFS contests in Ney York had already been tabled to the Racing, Gaming and Wagering Committee by Sen. Joe Addabbo. The new bill is now waiting for deliberation and passage in the NY Senate. Sen Addabbo’s amendment would allow more operators to apply for temporary permits and start operating after getting approval from the New York State Gaming Commission. So far, 15 operators have been issued temporary permits to facilitate DFS contests in the state.
The recent success in the White v Cuomo case follows the state’s move in January to legalize sports betting. Whether there is a correlation between the two remains a matter of speculation. Either way, there’s no doubt that the legalization of sports betting has had a massive effect on the gaming revenue in the state, even setting new records that have broken that of states like New Jersey.
Only two months into sports betting, New York has raked hundreds of millions of dollars in tax revenue. Unsurprisingly, FanDuel and DraftKings are among the top when it comes to sports betting handle and total revenue. And with each dawning day, it’s becoming clearer to state legislatures that the advent of the internet is changing the rules of engagement. What can be termed legal or illegal gambling, if at all, is open to interpretation, forcing lawmakers to reconsider previous stances held regarding the subject.
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