ALBANY – New York State has become the Wild West for the daily fantasy sports wagering industry.
A month after the contests were declared illegal by a state judge, an odd legal twist has emerged: The state agency responsible for overseeing the industry has quietly stopped any regulatory authority over more than a dozen daily fantasy sports companies that continue offering the wagering opportunities for what they claim are millions of New York customers.
The contests will remain unregulated – in the midst of heavy betting periods with three pro sports leagues’ seasons underway – until the state moves ahead with an expected appeal of the recent ruling by acting state Supreme Court Justice Gerald W. Connolly.
That could be until early December.
The state cannot also impose special taxes on the daily fantasy sports industry during this period.
The situation was noticed when the state Gaming Commission dropped any reference on its website to the daily fantasy sports industry. The agency had publicly reported financial information about the operations of the businesses in New York, temporary regulations intended to provide consumer protections, and a list of daily fantasy sports companies licensed to do business in the state.
“Since the notice of entry was filed, the Commission no longer has a role in regulating DFS. That required a modification of the website," said Gaming Commission spokesman Brad Maione.
It was not immediately clear how, or even if, the daily fantasy sports operators have changed any of their contests offerings or player rules in light of the new regulatory-free environment.
In his ruling, the state judge gave a victory to a lawsuit’s anti-gambling plaintiffs by declaring daily fantasy sports contests to be an illegal form of gambling in New York. It would require a change in the constitution to make DFS legal, not just an act of the Legislature and approval by Gov. Andrew M. Cuomo that paved the way for daily fantasy sports contests in 2016.
However, in a victory for the state and industry, the judge let stand the 2016 law that dropped any criminal penalties against those conducting of daily fantasy sports contests. That permitted daily fantasy sports wagering to continue uninterrupted.
The effect: The state had to stop regulating while the industry got to keep offering its games.
“The decision makes clear that the New York legislature’s decision to exclude fantasy contests from the definition of illegal gambling cannot be challenged in court. Accordingly, we will continue to offer fantasy sports to New Yorkers," FanDuel said in a statement Monday.
The company, through a spokeswoman, added: “We also believe in the benefits of regulation and will cooperate with efforts to permanently restore regulatory oversight.”
The unregulated environment is likely to expire if and when the state, which believes the contests are legal forms of gambling, appeals the ruling by Connolly. An appeal would likely result in an automatic stay of Connolly’s ruling, thereby permitting the regulatory role for the state to restart while the appeals process works its way eventually to the state Court of Appeals, New York’s top court.
The state is facing a deadline for an appeal: Dec. 2, which is 30 days after the judge’s ruling was formally filed.
State officials would only say that an appeal is being considered. Lawyers believe the state could try to bypass a midlevel appeals court and take the case directly to the Court of Appeals.
Cornelius Murray, an Albany lawyer representing the anti-gambling plaintiffs, is considering different routes, including going back to the lower court judge to seek a modification so the contests would be considered both illegal – as in the decision – but also a violation of criminal laws.
“We’re in that proverbial no-man’s land for the time being. I think the dust will settle, but it’s kind of a vague, difficult-to-describe period right now," Murray said Monday.
The daily fantasy sports situation comes as the Cuomo administration also is considering how it might move ahead with permitting broader sports gambling to occur in the wake of a U.S. Supreme Court ruling earlier this year that lifted a federal ban on wagering on pro and college sports contests.
The administration has been considering rules to at least permit the start-up of sports gambling at four commercial casinos, which would then lead to sports wagering at Native American-owned casinos, including the three Seneca Nation gambling halls in Western New York.
Industry insiders believe Cuomo is looking at including some sort of broader sports gambling OK in his 2019 state budget, which he will unveil sometime in January. Unclear is whether industry efforts to permit online gambling on sports contests will require a change in the state’s constitution, which would take several years to complete.