ALBANY – A state judge Monday ruled that daily fantasy sports contests are a form of gambling as defined by the constitution, and as such the Legislature did not have the authority to allow it as a legal gambling activity in 2016.
The ruling by Acting Supreme Court Justice Gerald W. Connolly means that that contests offered by DraftKings, FanDuel and other daily fantasy sports operators should be shut down by the state, according to the lawyer who brought the case.
“The practical effect is that the state should shut this down immediately," said Cornelius Murray, an Albany lawyer who represented gambling addicts and others who brought the case to overturn the law approved in the final hours of the 2016 legislative session.
The state Attorney General’s Office, which represented the state in the matter, referred calls to the New York State Gaming Commission and Gov. Andrew M. Cuomo. A spokesperson for the governor said the administration, including the Gaming Commission, which regulates daily fantasy sports companies, are still reviewing the court decision.
The judge said daily fantasy sports, also known as DFS, involves considerable elements of chance and that “no research, investigation, skill or judgment of the [DFS] participant can effect such future athletic performances.’’ But, the judge added, that research and skill can affect a contestant’s ability to win a contest and that DFS games are, in the end, “predominated by skill rather than chance."
Still, the judge appeared to take issue with the Legislature deciding that DFS is not gambling for the purposes of what violates the state’s ban on all gambling except that explicitly allowed in the state constitution. The plaintiffs, the judge said, needed to demonstrate that a game determined by a dominant degree of skill and a material degree of chance can still fit within the constitutional definitions of gambling activities that are banned.
“The Court finds that plaintiffs have made such demonstration," Connolly wrote in a decision handed down Monday afternoon.
The judge cited case laws and past opinions from the state Attorney General’s Office that sports gambling was encompassed in the constitution’s ban on “pool-selling, bookmaking and any other kind of gambling” not expressly allowed by the constitution.
It is likely the state will appeal the decision, but it is uncertain what the immediate practical effects might be from the judge’s ruling.
The judge, Murray noted, appears to be saying that he can’t tell the Legislature to pass a law criminalizing DFS contests under the state’s penal laws. “I think that’s OK. We’re not looking to put anybody in jail," Murray said.
But the lawyer said the state is directly involved in DFS activities in New York because the Gaming Commission is an agency that regulates and licenses the industry. “I’m very pleased, naturally, and I think the judge has made it unequivocally clear that this is gambling and that it would violate the constitution for the state to continue to allow it to happen,’’ Murray said.
The lawyer representing DraftKIngs saw reason to be hopeful.
“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," said attorney David Boies, in a statement. "We are continuing to study the court’s decision invalidating the regulatory structure and are committed to working with the legislature.”
In his decision, the judge wrote that DFS contests should fall under the scope of constitutionally banned gambling activities – “including in circumstances where the Legislature has determined that ultimate success in an activity premised upon the performance of selected athletes in future contests is predominately determined by the skill of the individual selecting the athletes.’’
Daniel Wallach, a Florida lawyer who is a national expert in sports and gambling laws, at a 2016 forum in Saratoga Springs predicted that the state's then-new DFS law faced legal hurdles ahead.
“It highlights that (New York) legislators do not have a completely free hand when it comes to drafting gaming legislation, that they must be mindful of constitutional prohibitions and limitations,’’ Wallach said of Monday’s ruling by the state judge.
Wallach said lawmakers in 2016 sought to avoid the constitutional issue, by characterizing fantasy sports as falling outside the definition of gambling under New York law.
Wallach, co-founding director of the University of New Hampshire School of Law’s Sports Wagering and Integrity Program, said he expects the state to quickly appeal Monday’s decision and that a stay will be granted to keep the DFS contests operating, uninterrupted. The lawyer said it’s likely the state’s highest court won’t be considering the case for another two to three years.
The decision came as the state is weighing whether to advance a system to regulate full-blown sports wagering gambling, following a U.S. Supreme Court decision earlier this year that lifted a federal ban on such kinds of betting.
The state in 2013 already approved a provision allowing sports gambling at seven commercial casinos authorized in a constitutional amendment process that year. Sports gambling at those facilities would be delayed, however, until after any federal prohibition was ended.
The state Gaming Commission has been working on regulations to allow sports gambling to commence at some point, possibly in 2019, in New York.
The crafters of the 2016 DFS law insisted at the time they had taken extra measures to ensure that it would not be rejected down the road by any courts.
On Monday, Assemblyman Gary Pretlow, a Westchester County Democrat who co-authored the DFS law, said he had not yet read the judge’s decision but that he disagreed with it. He termed as “ridiculous” calls by Murray, the plaintiffs’ lawyer, that DFS contests be immediately shut down.