Paid fantasy sports games were legalized in New York in 2016, following legal action taken against FanDuel and DraftKings for unlawful gambling.
New York’s constitution allowed for certain exceptions to its prohibition on gambling, such as tribal gaming.
The law stated that these games are not considered prohibited gambling activities because contestants use significant skill to select their rosters.
However, a group of four individuals affected by gambling harm filed a lawsuit against then-governor Andrew Cuomo and the New York State Gaming Commission.
The plaintiffs sought a permanent injunction to block the law and a declaration that it was constitutionally invalid.
The state Supreme Court initially ruled that these contests would be considered gambling under the state’s Penal Law.
However, the court also stated that the legislature acted within constitutional bounds to exclude fantasy sports contests from the scope of gambling provisions in the Penal Law.
The decision was appealed, and the Appellate Division reached a similar conclusion.
The plaintiffs then appealed to the New York Court of Appeal, questioning whether the legislature has the authority to declare certain activities as not being gambling.
The Court of Appeal disagreed with the previous judgements, arguing that chance must be the dominating factor to determine if a game is gambling under the constitution.
However, under the definition of gambling in the Penal Code, chance only needs to affect the game to a material degree.
The Court of Appeal stated that the legislature’s determination that fantasy sports contests are a game of skill and not chance has ample support.
Skilled players consistently win fantasy sports events, and rosters chosen by skilled players outperform randomly chosen rosters 80% of the time.
Therefore, the court concluded that fantasy contests do not meet the constitutional definition of gambling.
Since the case began, the landscape of legal gambling in New York has undergone significant changes.
Retail sports betting was launched in 2019, followed by the introduction of mobile sports betting earlier this year, with nine permitted operators.
The state is also in the process of issuing licenses to operate three casinos in the downstate region, which includes New York City and the surrounding area.
