Last Thursday, the New York Appellate Division, Third Department, ruled that Interactive Fantasy Sports (IFS) or Daily Fantasy Sports (DFS) is considered illegal gambling under the Article 1, §9 of the New York Constitution. The decision is likely to be appealed.
IFS has already gained a strong foothold in New York. Neighboring New Jersey has already established lucrative tax revenue from the online sports betting, something New York also enjoyed while Amendment 14 to the Racing, Pari-mutuel Wagering and Breeding Law was in effect.
Murphy v. National Collegiate Athletic Association ruled in May of 2018 that the Professional and Amateur Sports Protection Act violated the 10th Amendment of the U.S. Constitution. The court’s rationale was that it illegally empowered the federal government to order certain states to disallow sports gambling. As a result, that statute was no longer enforceable against states, businesses or individuals and individual states are now free to pass statutes that would legalize sports gambling within their borders. New York’s Amendment 14 was their attempt to legalize IFS.
Gambling and Sports Betting Attorneys predict the recent Third Department ruling will be appealed so that New York will not get left behind by other states like New Jersey, West Virginia and Pennsylvania. New Jersey and Pennsylvania have brought in over 30 Million in tax revenue each from mobile phone and online IFS betting.
“New York is almost an island in and of itself. Is it going to be stuck far behind and are we going to be stuck based on this Third Department [ruling]? Or are we going to make the decision to move forward and get behind daily fantasy sports? If they don’t make a change now, we are going to be way behind.”Goldberg Segalla sports and entertainment attorney Anthony Kroese, – via Klein Moynihan Turco
It only makes sense for New York to make another push for legalizing IFS. New York already has a plurality of in-person sports betting locations throughout Upstate casinos like the Sports Lounge at the Seneca Buffalo Creek Casino. Various companies have already partnered with the industry giants, DraftKings and FanDuel. For example, Madison Square Garden has various areas branded as the “DraftKings Daily Fantasy Sports Lounges.”
The Appellate Division analyzed IFS contests under New York’s definition of gambling that defines “chance” as the material factor in the outcome in a contest where a player risks something of value. The material factor of chance follows a minority of states in their definition of gambling. Inversely, the majority of states examine whether chance is the dominant factor, respectively lowering the bar for the amount of a skill necessary.
IFS is arguably a contest of skill where players must make strategic selections of players and rosters to win. However, ultimately the skill of determining those rosters does not allow the player to control actual game events such as injuries or weather conditions, reflecting the Third Department’s rationale on deciding IFS’s fate.
“This is an industry that is still subject to varied state laws and this decision highlights how those distinctions in the gambling laws that were drafted years ago could impact decisions in various states”BakerHostetler advertising attorney Linda Goldstein – via Klein Moynihan Turco
For now IFS will need the lawmakers to begin the long constitution amendment process to preserve online fantasy betting in New York State.