The New Daily Fantasy Sports Bill In New York Brings Up PASPA Concerns

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NY DFS legislation

New York Assemblymember Dean Murray introduced two new bills that would affect the daily fantasy sports industry, including one that implies that the federal sports betting law, PASPA, would have to be repealed in order to “authorize” DFS in the state.

The new New York DFS bills

Murray added two new pieces of legislation to the mix. One is simply an Assembly version (A08588) of an earlier Senate bill, saying DFS contests would be exempted from the “contest of chance” language in New York’s penal code. That bill, and Martin’s, mimic language in the federal Unlawful Internet Gambling Enforcement Act.

Murray’s other bill (A08587) would amend an article of the state constitution that involves gambling. That bill would make an exception for fantasy sports, and would allow the state to authorize “fantasy sports wagering.”

The fourth bill is one that seeks to add DFS to the state’s gambling code.

A closer look at the proposed constitutional amendment

The constitutional amendment bill would add the following language to section 9 of article 1, making an exception from gambling for fantasy sports:

…and except for fantasy sports wagering on professional sports which may be authorized by the legislature, in a manner prescribed by the legislature for offering and conducting gaming and wagering, provided however, that such authorizations shall be preceded by the elimination of the federal ban on professional sports wagering…

The state constitution has been referred to as one of the legal points in the New York attorney general’s case against DraftKings and FanDuel; AG Eric Schneiderman alleges that the DFS operators are illegal gambling operations.

Murray addressed the bill in a press release a few weeks before the legislation was filed:

The second bill is a contingency measure. If the courts rule that these sites do constitute gambling, this measure serves as the first step in a constitutional amendment process in granting fantasy sports sites like FanDuel and DraftKings exemptions. …

“The second bill is a ‘just-in-case’ measure in the event that the courts rule that FanDuel and DraftKings do constitute gambling, providing an exemption for these sites from gaming laws.

The key point in the language of this bill is “preceded by the elimination of the federal ban on professional sports wagering.” That would mean that the Professional and Amateur Sports Protection Act would have to come off the books at a federal level, an idea that has gained some traction but still isn’t terribly close to happening in the short term.

But the PASPA reference in the bill also signals what some have thought ever since the possibility of licensing and or regulating the DFS industry cropped up this year: Any such DFS legislation may run into the same problem as the New Jersey sports betting law that is currently tied up in the court system.

‘Authorizing’ DFS is a PASPA problem?

The legal issue at play in the New Jersey sports betting case is whether the state is “authorizing” sports betting with its law. PASPA says it is unlawful for:

“a governmental entity to sponsor, operate, advertise, promote, license, or authorize by law or compact, or … a lottery, sweepstakes, or other betting, gambling, or wagering scheme based, directly or indirectly (through the use of geographical references or otherwise), on one or more competitive games in which amateur or professional athletes participate, or are intended to participate, or on one or more performances of such athletes in such games.”

There are several sports betting bills introduced in state legislatures that basically contain the same language, saying that the federal ban on sports wagering would have to be repealed for the law to take effect. Of course, if New Jersey were to prevail in the sports betting court case, PASPA concerns could be rendered moot, and it might be open season for states to pass sports betting bills.

The New York DFS bill is believed to be the first to include a reference to PASPA, but it’s not clear that every DFS bill out there could have a problem with PASPA.

If a state just seeks to regulate the DFS industry — such as the proposed Massachusetts regulations — it might not be an issue.

The potential problem might come in when a state bill attempts to license, or even just legalize, DFS sites in some form, which would bring up the idea of “authorization” that has been at issue in New Jersey.

Of course, if such a DFS bill passes a state legislature and becomes law, there would have to be a party interested in bringing a suit to stop the law from going into effect. In the New Jersey sports betting case, the plaintiffs consisted mostly of the major professional sports leagues, who would clearly not be interested in filing suit to stop DFS. The NCAA is also a plaintiff, and some in college sports have been combative with the DFS industry this year.

Right now, the PASPA concerns are mostly a matter of legal speculation, but the new New York bill clearly raises the issue that PASPA could pose a problem for DFS legislation.