In recent days full of mega-deals between professional sports teams and casino operators, the New York daily fantasy sports (DFS) industry might be in for a shake-up.
New York Acting Supreme Court Justice Gerald W. Connolly ruled DFS to be a form of prohibitions against gambling as defined by the state constitution. The ruling now puts fantasy sports operators like DraftKings and FanDuel in a tricky situation.
Flashback to 2015
In 2015, then-Attorney General Eric Schneiderman issued a cease and desist order to both FanDuel and DraftKings forcing them to close down operations.
However, lawmakers changed NY law a few months later by legalizing DFS, calling it a game of skill.
Language from the bill reads:
“Interactive fantasy sports are not games of chance because they consist of fantasy or simulation sports games or contest in which the fantasy or simulation sports teams are selected based upon the skill and knowledge of the participants and not based on the current membership of an actual team that is a member of an amateur or professional sports organization.”
Fast forward
An anti-gambling coalition hired Albany attorney Cornelius Murray to help challenge the new law. The coalition argued that DFS required a constitutional amendment through a voter referendum–and they won.
“The practical effect is that the state should shut this down immediately,” Murry told The Buffalo News.
It’s highly likely that the state will appeal the decision.
The state gaming commission could not be reached for comment.
Assemblyman Gary Pretlow, co-author of the DFS law, told reporters he has yet to read the judge’s decision.
Pretlow, chairman of the Committee on Racing and Wagering, has been instrumental in several key pieces of gaming legislation.
Future gaming in the Empire State
The ruling comes as New Yorkers are anticipating the release of regulations to allow for sports betting at the states four upstate casinos.
Also, gaming regulators have been mum on the release date. Certainly, gaming operators had hoped for sports betting to start prior to the NFL season.
Instead, the state has watched neighboring New Jersey reap the rewards from the US Supreme Court’s landmark decision on May 14.
In the short term, it appears that DraftKings and FanDuel will be unaffected.
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Statements from the two DFS giants
DraftKings outside counsel David Boies released this statement:
“We are pleased that the court upheld the New York Legislature’s decision to decriminalize daily fantasy sports contests and that DraftKings can continue to offer their services to players. We are continuing to study the court’s decision invalidating the regulatory structure and are committed to working with the legislature.”
Similarly, FanDuel issued a statement:
“The decision makes clear that the New York Legislature’s decision to exclude fantasy contest from the definition of illegal gambling cannot be challenged in court. Accordingly, we will continue to offer fantasy sports to New Yorkers. We also believe in the benefits of regulation and will cooperate with efforts to permanently restore regulatory oversight.”
Lawmakers might now look to current Attorney General Barbara Underwood for a weigh in.
Above all, DFS has generated around $5 million in annual taxes.
