Once A Daily Fantasy Sports Opponent, New York AG Schneiderman Defends Law In New Filing

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Schneiderman NY DFS

New York Attorney General Eric Schneiderman defended the legality of a new daily fantasy sports law in a filing this week in a case in front of the County of Albany Supreme Court.

That, of course, comes after the NY AG spent the better part of last year saying DFS sites DraftKings and FanDuel were operating illegally under previous state law. The legal wranglings involving Schneiderman came to a close in October, with a settlement of $6 million a piece with the DFS operators stemming from false advertising claims.

The backstory of the DFS lawsuit in NY

In the case, a group of citizens filed suit, saying that a law legalizing and regulating DFS in New York — enacted last year — violates the state constitution. That effort is spearheaded by an anti-gambling group called Stop Predatory Gambling.

The defendants in the case are Gov. Andrew Cuomo — who signed the bill into law — and the New York State Gaming Commission, which is now in charge of DFS regulation. As the state’s AG, Schneiderman and his office act as counsel.

As part of the case, Schneiderman entered a “memorandum of law in support of motion to dismiss” in the case. You can see the entire memo here.

Schneiderman’s argument on DFS

In the new filing, Schneiderman attempts to refute the claim of plaintiffs that the New York DFS law 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…

AG argues New York can define gambling how it wants

The crux of Schneiderman’s argument is that the legislature can define terms in the constitution as it sees fit:

Article I §9 of the State Constitution expressly delegates to the Legislature the authority to enact appropriate laws to effectuate the constitutional prohibition against “gambling” —  a term the Constitution itself leaves undefined.

Consistent with that authority, the Legislature has enacted L. 2016 Ch~ 237 (“Ch. 237”), which resolved the legal status of specific internet games known as interactive fantasy sports and declared that such contests properly fall outside the definition of gambling in New York as defined in the Penal Law.

And then:

Although Article I §9 does not define gambling, the delegation to the Legislature of the responsibility to “pass appropriate laws to prevent offenses … “ necessarily gives the Legislature latitude to determine what conduct constitutes (and does not constitute) impermissible gambling in New York.

The NY legislature has ‘wide latitude’

Schneiderman’s filing also argues that the state legislature is afforded the ability to legislate things not pondered or explicitly outlined by the constitution:

Here, the Legislature’s enactment of Ch.237 carries the presumption that it is a constitutional exercise of its duty to pass appropriate laws in regard to defining permissible and prohibited gambling activities.

The rationale for affording the Legislature broad latitude in weighing the appropriate scope of New York gambling laws is enhanced for interactive fantasy sports, online games which did not exist until recently, were not contemplated by the drafters of either the Constitution or the general gambling statutes, and have attributes not present in traditional gambling contests.

As the Court of Appeals stated in Dalton v. Pataki, 5 N.Y.3d at 265, “[t]he language of the Constitution is not so rigid as to prevent this type of update and modernization.”

Other states have done the same thing

One of Schneiderman’s final arguments is that a variety of state legislatures have come to the same conclusion that DFS should not be treated as gambling. He goes onto list the states that legalized and regulated DFS last year by defining them as falling outside of gambling code.

The analysis ignores the fact that a variety of AGs in many states have opined that DFS gambling under current (or previous) state law.

Previously, Schneiderman said DFS was unconstitutional

Schneiderman is obviously in the awkward position of defending something his office battled throughout 2016, at least partially on constitutional grounds. In both cease-and-desist letters to DraftKings and FanDuel and a request for injunction — and indeed throughout the legal battle — Schneiderman raised the constitution.

From the C&D letters:

The unlawful and illegal conduct under consideration by our Office includes, but is not limited to, the following:

(a) Running a book-making or other kind of gambling business in violation of Article I, Section 9 of the New York State Constitution;

And from a presser after the injunction request:

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.

Obviously, Schneiderman would argue now that the DFS language in the new law would have meant he would not have taken such actions in the past, had the law existed previously.

What’s next for the DFS case?

The state’s motion to dismiss in the case will be made on March 24, according to a notice filed by Schneiderman. In the wake of that, the lower court would then either dismiss the case or rule on its merits.

No matter what the decision is, the case is likely to be appealed up the food chain in the NY court system.