The October 30 decision by the New York Supreme Court repealed parts of the 2016 law, but decriminalized DFS gaming in the state.
The New York Gaming Commission appears to have divested itself of the duty of overseeing daily fantasy sports (DFS) following a recent NY State Supreme Court ruling which undermined its authority on the matter. The New York Supreme Court ruled that commission members had overstepped their authority when they legalized daily fantasy sports in 2016.
The New York law in 2016 formally classified daily fantasy sports as a “game of skill“, because professional DFS competitors known as grinders win 89% of all the prize money on daily fantasy sports sites like DraftKings and FanDuel. The argument goes that people who study DFS gaming as a business proposition can win consistently and thus it is a form of skill.
The New York Supreme Court did not dispute that logic, but said state legislators exceeded their authority by approving a bill (the “Interactive Fantasy Sports Law“) that defined DFS as a game of skill. According to the New York justices, the state legislature instead should have amended the state constitution to classify DFS alongside other acceptable forms of gambling.
To have changed the state constitution would have required a bigger percentage of the vote, so proponents of DFS gaming took a more expedient route to legalization.
NY Gaming Commission’s Website
Since the ruling on October 30, the Buffalo News noted that the New York Gaming Commission‘s official website no longer contains any references to daily fantasy sports at all. The fact the Gaming Commission scrubbed the site of any mention of DFS gaming suggests they have washed their hands of the practice.
When Gaming Commission spokesman Brad Maione was asked by the Buffalo News about the change, he said New York state regulators “no longer has a role in regulating DFS. That required a modification of the website.”
DFS Decriminalized
DraftKings, FanDuel, and other DFS operators can continue to accept real money play from New Yorkers. The October Supreme Court ruling upheld the part of the 2016 law which decriminalized daily fantasy sports. Ironically, the decision means that even DFS companies which have avoided New York’s murky gaming industry in the past now have no threat of prosecution for accepting play from New Yorkers.
Meanwhile, FanDuel issued a statement saying they hope to “cooperate with efforts to permanently restore regulatory oversight” to DFS in New York. It is a much different stance from 2015 and before, when FanDuel and DraftKings opposed any legislation which would regulate their industry or class it among the forms of gambling in the United States.
Why FanDuel Wants NY Regulations
The reason FanDuel wants regulatory oversight is the risk of a further change in DFS’s status in New York — a state from which FanDuel and DraftKings draw about 10% of their revenues. Cornelius Murray, the attorney for the anti-gambling group which brought the challenge to the 2016 statute in the first place, said his group might file another lawsuit to have DFS gaming criminalized once again.
Though regulated daily fantasy sports means DFS operators have to pay taxes, it also gives them permanent protections from such lawsuits. The New York state legislature is much different from the one which passed the pro-DFS law, though.
The state has until December 2 to file an appeal of the decision. At the moment, state officials have given no indication whether they would file an appeal or not.
New York: Leader on DFS Gaming
New York has a complicated history with daily fantasy sports. Prior to October 2015, FanDuel and DraftKings expanded into billion-dollar businesses and attracted investments from Comcast, NBC Sports, and several Wall Street private equity companies. Even the Walt Disney Company came a hair’s breadth from investing on the daily fantasy sports industry.
When a scandal hit DraftKings and FanDuel, then-New York Attorney General Eric Schneiderman declared daily fantasy sports illegal and sent a cease-and-desist letter to DraftKings and FanDuel. Schneiderman’s move brought the two DFS companies, long bitter rivals, into a strategic alliance on legal cases and lobbying efforts.
The two companies filed lawsuits against Eric Scheiderman and his office, which broughts threats and countersuits by Schneiderman. After several months of posturing and a pair of court decisions which left the issue up-in-the-air, Schneiderman and the DFS companies agreed to a compromise. If DraftKings and FanDuel could get the New York state legislature to legalize daily fantasy sports before a key court case in September 2016, Schneiderman would drop his opposition to the hobby.
August 2016 DFS Legalization Bill
That led to the August 2016 legalization bill by the New York General Assembly and Senate. With days remaining to pass such a bill, a New York constitutional amendment was out of the question. Now, it appears proponents of daily fantasy sports might have to pursue that constitutional amendment, though the urgency to pass such legislation is not what it was in the summer of 2016.
A lawsuit might force the hand of DraftKings and FanDuel, but new attorney general Letitia James might not be as adamant about daily fantasy sports. With the myriad of issues New York’s attorney general’s office has encountered in the past two years, DFS gaming might be far down the list of priorities.
