New York DFS Hangs On Decision From State’s Highest Court

New York daily fantasy sports fans could find out in the coming months if DFS will survive an appeal before the state’s highest court. 

The state Court of Appeals today heard the second round of oral arguments in White v. Cuomo, which challenges the constitutionality of a 2016 state law that legalized DFS in New York. The case was filed in late 2016 by four New York residents who claim the law’s DFS provisions violate the state constitution’s prohibition on gambling. 

Oral arguments are the final phase of an appeal before a decision is made. The first round of arguments was heard in October before the case was reargued this month. A decision by the high court is now expected in the coming months.

What Are The Court’s Options?

It will be the state Court of Appeals’ determination of whether DFS is a game of skill or a game of chance that will likely determine the fate of DFS in the Empire State.

The Court of Appeals may decide to reverse, uphold, or modify a lower court’s decision in the case, or it can send the case back to a lower appellate court. A decision upholding a Feb. 2020 appellate court ruling in the case, however, could put an end to DFS at least in the short term, until New York voters have a chance to allow DFS by constitutional amendment.

A proposed DFS amendment would appear on the ballot no sooner than November 2023, say commentators on the case. 

The state’s constitutional ban on gambling does not apply to the state lottery, pari-mutuel horse race betting, and legal casino gambling. Sports betting, which is not addressed in the lawsuit, is run out of the state’s casinos. 

New York retail sports betting launched in 2019 and operates in both tribal and commercial casinos. Statewide mobile sports betting is operated on servers based at four upstate commercial casinos. Mobile apps launched on Jan. 8, 2022.

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How New York DFS End Up In Highest Court

White v. Cuomo landed in the New York Court of Appeals in October 2021 after a lower appellate court found DFS provisions in the 2016 state law unconstitutional based on the state penal code’s definition of gambling as a “contest of chance.”

The New York Constitution does not define gambling, per a court summary

Both the lower appellate court and the state Supreme Court, which is a trial court in New York, had ruled the DFS law unconstitutional based on a “material” element of chance, even if some skill is involved by players.

The 2016 legislation challenged in White v. Cuomo is found in the state’s Racing, Pari-Mutuel Wagering, and Breeding Law.  New York legalized DFS under that law in 2016 by adding language that specifically excluded DFS from the definition of gambling under the state penal code. 

Legal challenges began soon thereafter.

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Arguments For And Against New York DFS Provisions

The State of New York has argued that DFS is a game of skill, and regulates it as such. The New York State Gaming Commission specifically uses the phrase “games of skill” on its website to define interactive fantasy sports. DFS is a popular type of IFS regulated by the NYSGC. 

“What evidence is there that this is a chance-based activity? Not a single study is cited by the other side,” New York Assistant Solicitor General Victor Paladino said during oral arguments today. 

Paladino said DFS is a simulation of events, not live betting. That drew the attention of Judge Jenny Rivera, who seemed to agree that there is a distinction. But Rivera still didn’t sound convinced that DFS isn’t gambling. 

So “it’s make-believe. They’re not really betting, but people are making money and they’re losing money… So I’m hard-pressed to see how it isn’t prohibited by the (state) constitution,” Rivera said. 

The lower courts have sided with DFS having at least an element of chance. Contests of chance fall under gambling per the state penal code, which defines contests of chance as any game “in which the outcome depends in a material degree upon an element of chance, notwithstanding that skill of the contestants may also be a factor therein.”

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