Editor’s Note: On March 22, 2022, DFS games were deemed legal in New York by the NY Court of Appeals. Read on for more details here.
Update: Hector LaSalle, the presiding justice from the NY second division, has been vouched in as the seventh judge for this case. Meanwhile, Judge Shirley Troutman was sworn in by Gov. Hochul to join the NY Court of Appeals on Jan. 12.
The following scenario sounds mind-boggling, but it’s not out of the realm of possibility:
By March or April 2022, online sports betting could be legal in New York, while daily fantasy sports could be illegal in the state.
And whether daily fantasy sports in New York is deemed constitutional could conceivably come down to a replacement judge’s vote in the state’s highest court.
The DFS case will be reargued in the NY Court of Appeals on Feb. 8, 2022. The hearing is needed because the judges were deadlocked at 3-3 on Oct. 5.
A lot is on the line.
“It would be nuts. There’s no other way to put it,” gaming legal expert John Holden told PlayNY when asked about the aforementioned scenario.
“Obviously, there’s legal reasons for that, right? But at the end of the day, if you’re looking at this from a 1,000-foot view, I mean, that doesn’t make a lot of sense. So I think legally we can explain it but, common sense-wise, it won’t make much sense.”
NY DFS case has already been a wild ride
Normally, there are seven judges hearing a NY Court of Appeals case. But Judge Michael Garcia recused himself.
Meanwhile, Judge Eugene Fahey, who was opposed to DFS, is facing mandatory retirement on Dec. 31. He’ll be replaced by Judge Shirley Troutman, and it’s unknown how she’ll vote.
Rob Rosborough, a NY Court of Appeals expert, believes the court will then vouch in a seventh judge so as to avoid the possibility of another tie. In the NY Court of Appeals, they need four votes to take any action at all.
Based on past votes, it is projected to go 3-2 in favor of DFS. So if Troutman votes in favor, they’d have the necessary four votes. If not, well, then a replacement could decide its fate in the state.
Rosborough said it’s difficult to predict Troutman’s vote given her past position in the fourth department of the appellate division, where judges don’t sign that many opinions.
“This is so up in the air, no one really knows what’s going to happen,” Rosborough told PlayNY.
What’s being decided in NY DFS case
The reason the case has reached the NY Court of Appeals is because DFS has been deemed unconstitutional by the trial court and the appellate court.
The argument is that NY daily fantasy sports legislation violates the state constitution’s prohibition of gambling. Essentially, DFS is just another form of gambling, and so it’s banned under the New York constitution unless they specifically get a constitutional amendment to authorize it.
As mentioned previously, there’s a significant split between the judges.
Sports betting, so far, has avoided a similar lawsuit. Voters amended the constitution to allow sports gambling alongside commercial casinos. The new sports gambling law in New York requires sportsbooks to house servers for online betting at those commercial casinos.
Let’s say DFS is ruled unconstitutional. What then?
It could potentially take two years for the legislature to create a constitutional amendment to allow DFS in New York.
If NY online sportsbooks go live before the Feb. 13 Super Bowl, as expected, it might not impact industry titans FanDuel and DraftKings. But it could be devastating to smaller competitors.
“At this point, do FanDuel and DraftKings care? Assuming that the plug isn’t pulled before their sportsbook launch in NY? Probably not. That’s just my guess. Once they convert those (DFS) customers, I’m not sure it makes much difference to them,” Holden said.
“The smaller DFS operators that have been sitting on the sidelines not getting licenses because of some absurd decision by the gaming commission? I mean, that’s a different story. Those guys have been burned for four years while DraftKings and FanDuel have been given a monopoly. I mean, that’s absurd. And more people should be furious about that.”
Of course, this is a worst-case scenario.
“We could see it pop up on a ballot, or we could just see it fade away,” Holden said. “We just don’t know.”
Added Rosborough: “It really would put the smaller companies who are trying to compete and do something innovative or new at risk. Because this case is going to say in particular what a legislature needs to consider when they make these types of determinations.
“And for someone to come up with a new type of game that could potentially be considered gambling, you’re looking at 4-5 years of litigation in front of you if you have an anti-gambling group that wants to challenge it and tie up how long it takes for it to get to market.”