ALBANY – Lawmakers and Gov. Andrew Cuomo exceeded their legal authority and needed to let voters decide whether New York state could legalize gambling through online daily fantasy sports contests, claims a new lawsuit filed Wednesday morning.
What’s more, the suit claims that fantasy sports contests are gambling, despite what the Legislature declared.
“It’s hilarious to think this isn’t gambling. It’s pretty simple. It’s a game that involves betting. You put up money, and you forfeit the money if you lose,” said Cornelius Murray, an Albany lawyer representing the four plaintiffs, including two from Western New York.
The suit filed in state Supreme Court in Albany seeks a declaratory judgment to end the contests offered by companies like DraftKings and FanDuel, which claim they have more than one million New York customers.
“This law doesn’t improve the lives of New Yorkers. It wasn’t driven by a grass roots movement of citizens. It was driven by very powerful gambling interests trying to sneak internet gambling into every home and onto every smartphone in the state,’’ said Les Bernal, national director of the Washington, D.C.-based Stop Predatory Gambling.
The four plaintiffs in the suit claim they have been affected by compulsive gambling problems, either personally or through family members. The Stop Predatory Gambling group is helping them bring the lawsuit.
The plaintiffs seek a declaratory judgment, declaring the contests to be in violation of the constitution, and then a permanent order halting the state Gaming Commission and other state officials from further implementing the sports contests.
Legislation declaring the daily fantasy sports contests legal “games of skill” instead of illegal “games of chance” was approved by the Legislature in June, in the middle of the night during the last hours of the 2016 session.
Cuomo signed the bill in August, saying it offered previously unavailable consumer protections, along with an estimated $4 million in tax money for Albany from the industry. Cuomo’s Gaming Commission in September then issued conditional licenses that allowed the contests to resume.
The plaintiffs in the new litigation, however, say the Legislature and Cuomo acted illegally, and should have followed the path taken in 2012 and 2013 when they went through the constitutional amendment process to permit the legalization of up to seven new casinos in New York. A change in the constitution requires passage in two, separately elected legislative sessions, followed by a statewide referendum.
The Constitution specifically prohibits gambling, with specific exceptions for the state’s own lottery, pari-mutuel wagering, certain charitable games and the new seven-casino provision.
“The Legislature can’t unilaterally amend the constitution,” said Murray, the lawyer representing the plaintiffs. He has been involved in other high-profile gambling-related cases over the past couple decades.
The industry contends that the daily contests are legal games of skill because they require careful study of statistics and other information to determine which players to pick or not pick for their fantasy teams. Murray said a range of external forces – from weather to injuries – sharply reduce that claim of skill.
The sports contests, played by more than one million New Yorkers who pay fees on the performance of players in an array of professional sports matches, were targeted last year by Attorney General Eric Schneiderman. He ordered the two biggest companies – Boston-based DraftKings and Manhattan-based FanDuel – to shut down what he said were illegal gambling centers promoted by teases of big payoffs.
“Daily fantasy sports is neither victimless nor harmless,’’ Schneiderman said last November.
The sides wrangled for several months, which included periods of shutdowns by some fantasy sports companies. In March, DraftKings and FanDuel, which control 95 percent of the market, struck a deal with Schneiderman in which the state would put its lawsuit against the companies on hold. That gave the companies time during the spring’s legislative session to try to persuade lawmakers to carve out a specific legal exemption for their contests. That move proved successful following the hiring of an army of well-connected lobbyists to work the governor’s office, Senate and Assembly.
The games were turned back on in September – in time for the industry’s busiest and most lucrative period: professional football season.
The litigation filed today comes after the main trade group that fought the daily fantasy sports legalization effort in August said it would not litigate the issue. The New York Gaming Association, which represents racetrack-based casino operators, said it was time to move on to other issues.
But the Stop Predatory Gambling group has been raising money for several months to challenge the fantasy sports law. Bernal said the companies offering the daily contests are targeting younger people not attracted to bricks-and-mortar type gambling at casinos.
“The intent is to get a whole new generation hooked on gambling,’’ he said.
Bernal also points to a Siena College poll in May that found 45 percent of New Yorkers oppose the daily contests, with 37 percent in support.
“The reasons why every New Yorker should care about this, regardless of whether they gamble or not, is this form of gambling is fleecing New Yorkers,” Bernal said.
At an Albany Law School forum in August, Sen. John Bonacic told a group of gambling industry lawyers, lobbyists and others that the legislation was crafted specifically designed to stand up to such legal challenges as being brought today. Bonacic, an Orange County Republican and sponsor of the measure in the Senate, said the industry was involved in writing the legislation.
“They were satisfied that what we were doing would meet the constitutional challenge,’’ Bonacic said at the time.
In the past month, the commission has issued temporary operating permits to nine daily fantasy sports companies; the agency is now drafting regulations that will cover long term operating licenses for the firms.
The June legislation requires the firms to pay a tax of 15 percent on their gross revenues from contests offered in New York, plus an additional tax totaling up to $50,000 apiece per year.