On Thursday, a New York appeals court struck down 2016 legislation that expanded state-wide gambling. The New York Appellate Division Third Department upheld a lower court’s decision that Interactive Fantasy Sports (IFS) or Daily Fantasy Sports (DFS) is illegal according to the N.Y. Penal Code and found that the 2016 legislation is unconstitutional.
Bill S8152 was an amendment to the Racing, Pari-mutuel Wagering and Breeding Law that added Article 14 to include the registration and regulation of interactive fantasy sport contests. When the bill was passed in 2016, more than 12 states issued negative opinions on fantasy sports contests. Colorado, Indiana, Tennessee, Mississippi, Virginia, and Missouri also passed similar legislation decriminalizing these fantasy contests.
Much of a lower court’s negative IFS ruling was upheld. However, the Third Department went even further, finding that Article 14 was an unconstitutional expansion of gambling and the legislature’s rationale to decriminalize IFS because it is a game of skill was also unconstitutional.
The plaintiffs, who comprise several state taxpayers, sought a declaratory
judgment that Article 14 violates NY Constitution, Article I, § 9. The plaintiffs alleged to have been affected by the negative impacts of gambling. Article 1, §9 states:
“. . . no lottery or the sale of lottery tickets, pool-selling, bookmaking, or any other kind of gambling, except lotteries operated by the state and the sale of lottery tickets in connection therewith as may be authorized and prescribed by the legislature . . .”
NY Constitution, Article I, § 9
The New York Constitution does not explicitly define gambling and the Third Department found the N.Y. Penal Code’s an appropriate definition of the legislative intent of Article 1, §9.
The N.Y. Penal Code defines gambling as an event when a player risks, stakes, or bets something of value on the outcome of a contest, game of chance, or future event that is not under the player’s control or influence. The contest player is in agreement that they will receive something of value for a certain outcome.
The Third Department agreed with the Legislature’s argument that IFS players use skill in selecting teams and specific real-world player lineups. However the skill of selecting teams was not material to the outcome, and the court ultimately ruled that the contest players do not have control over their selected athlete’s performance in real-world sporting events.
As many fantasy players know, a variety of uncontrollable factors ultimately determine the fate of a fantasy contest. Injuries, crucial officiating calls, and weather conditions, are few various plagues or advantages that a contest player has no control over.
Interactive Fantasy Sports creates an additional tax source for New York. During the fiscal year of 2016/17 IFS generated roughly 2.8 million in tax revenue on 18.6 million gross revenue after Article 14 was passed.
Companies hit by this ruling include industry heavyweights like FanDuel and DraftKings, who collected 180.4 million in entry fees from New York players during the 2016/17 year after Article 14 was enacted.
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