Anti-Gambling Group Leads Lawsuit Against New York Daily Fantasy Sports Law

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NY DFS lawsuit

The constitutionality of a new law legalizing and regulating daily fantasy sports in New York is being challenged in court, according to the group Stop Predatory Gambling.

The NY DFS lawsuit, at a glance

According to SPG, a group of New York citizens filed a lawsuit with the New York State Supreme Court on Wednesday. While the state legislature and Gov. Andrew Cuomo enacted a law regarding DFS this summer, the lawsuit contends that a constitutional amendment was needed to do this.

Other forms of gambling in the state are authorized by the state constitution, the lawsuit contends, so DFS must be also. The law’s proponents and the DFS industry argue the activity is a game of skill, and not gambling.

Attorney Neil Murray of the firm O’Connell and Aronowitz filed the litigation, according to a release from SPG:

“The plaintiffs seek to protect the public from predatory gambling consistent with the Constitution,” Murray said. “They also intend to stop FanDuel, DraftKings and other internet gambling operators from exploiting the financially desperate and the addicted in New York.”

The full lawsuit can be seen here.

According to SPG, it “raised the money to fund the litigation from individual supporters and citizen groups in New York,” noting it “does not accept any financial contributions from gambling interests.”

A spokesperson for FanDuel and DraftKings offered this statement:

“The state constitution specifically gives the legislature the power to define what is – and what is not – gambling, and the legislature has done so a number of times in the past and long before the emergence of fantasy sports. The Attorney General, who certainly has had some strong opinions about fantasy sports, has clearly stated he will enforce and defend this new law. This is a layup – they have no case.”

Inside the lawsuit

The crux of the argument put forth by the plaintiffs is that the law as passed violates Article 1, Section 9 of the state constitution, which reads, in part:

No law shall be passed… except as hereinafter provided, no lottery or the sale of lottery tickets, pool-selling, bookmaking, or any other kind of gambling, except lotteries operated by the state …except pari-mutuel betting on horse races … and except casino gambling at no more than seven facilities as authorized and prescribed by the legislature shall hereafter be authorized or allowed within this state…

The lawsuit argues that “interactive fantasy sports” as defined in the law “constitutes gambling that falls within the express prohibition” of the constitution.

The suit goes on to note that NY Attorney General Eric Schneiderman himself once argued that DFS violates the constitutional language above. When he filed for an injunction seeking to stop the operations of FanDuel and DraftKings, this appeared in his filing:

The New York State Constitution has prohibited bookmaking and other forms of sports gambling since 1894. Under New York law, a wager constitutes gambling when it depends on either a (1) “future contingent event not under [the bettor’s] control or influence” or (2) “contest of chance.”

So-called Daily Fantasy Sports (“DFS”) wagers fit squarely in both these definitions, though by meeting just one of the two definitions DFS would be considered gambling.  DFS is nothing more than a rebranding of sports betting. It is plainly illegal.

Of course, it will be up the court to make that determination.

The counterargument against the lawsuit

The argument that will be used in reply to the lawsuit is already known.

The industry, which helped craft the legislation, and its authors — Sen. John Bonacic and Rep. Gary Pretlow — argue that it is within the scope of the government to to decide what falls within the definition of gambling.

When Pretlow’s bill passed the Assembly earlier this year:

A few members rose in opposition, saying they believe DFS is gambling and questioning whether the bill as written would violate the state constitution. Pretlow dismissed those concerns, insisting the legislature can define fantasy sports as not gambling, and therefore “not subject to the provisions of the constitution.”

The question that emerges out of that argument: Could the NY legislature theoretically circumvent the constitution by declaring anything it wants to be “not gambling”? For example, if it said roulette was “not gambling” in the state code, would that also pass muster?

Whether the legislature indeed has the power to define “gambling” without amending the constitution will clearly be at the crux of the case.

The backstory of DFS in NY, and the AG’s role

The DFS industry had been shut out of the New York market for months during a settlement with Schneiderman. He contended that DraftKings and FanDuel were running afoul of the state gambling law. He issue cease-and-desist letters to that effect last fall.

Now, Schneiderman will be in charge of defending the law from New York’s perspective — arguing that DFS is a game of skill as the legislature defined it.

Schneiderman has reportedly tacitly approved of the law as passing muster; he also said he would defend the law after Cuomo signed it:

“As I’ve said from the start of my office’s investigation into daily fantasy sports, my job is to enforce the law and protect New Yorkers from illegal or unscrupulous conduct.  Today, the Governor has signed a bill that amends the law in order to legalize daily fantasy sports contests, with consumer protections for New York players. I will enforce and defend the new law.”

New York’s government attempted to clear up the law regarding DFS’ legality, but the new lawsuit obviously calls into question the efficacy of that effort.