In response to a lawsuit that was filed in 2016, the New York Court of Appeals ruled fantasy sports games were not illegal gambling products.
In 2016, New York legalized paid fantasy sports after the Attorney General of New York took action against FanDuel DraftKings and other illegal gambling sites in 2016.
The law stated that tribal games, which are not prohibited gambling because they require significant skill from the players to choose their teams, do not fall under New York constitution’s prohibition on gambling.
Soon after, however, four people who claimed to have been affected by gambling damage filed a suit against the then-governor Andrew Cuomo, and the New York State Gaming Commission, challenging the law. Plaintiffs sought a permanent court order to prevent the law’s implementation and declared it constitutionally invalid.
First, the case was brought before the Supreme Court of the State. The court ruled that the contests were indeed gambling in the eyes of the Penal Law. The court went on to state that “the legislature acted within its constitutional bounds in excluding IFS contests” from the Penal Law’s gambling provisions.
The Appellate Division reached a similar decision after an appeal.
They then filed an appeal with the New York Court of Appeal to ask if the Legislature can simply declare that certain activities are not gambling.
The Court of Appeal had an entirely different view on whether or not fantasy contests are gambling. It argued that both previous judgements had made “incorrect” claims.
The argument was that in order to determine whether a game is gambling, the Constitution must be able to identify if the element of chance “dominates” the gameplay. In contrast, the Penal Code defines gambling as a game where chance is “materially” involved.
It said that the “legislative’s factual conclusion that [fantasy sport] contests were a game “of “skill”, not “chance” and that they are therefore not “gambling” has received resounding approval”.
The court found that players with a high level of skill consistently won fantasy sports competitions and their rosters outperformed those chosen randomly 80% more often.
It said that as a consequence, fantasy contests did not fit the definition of gambling in the constitution.
Participants use their understanding of the sport in question, their player’s performance, their histories and offensive/defensive strengths, their team schedules and coaching strategies as well as their perceptions of how opposing players perform, their statistics and their fantasy scoring system to make their selections. While participants cannot influence the performance of athletes in real sporting events, they can still have a significant impact on the result.
The legal framework for gambling in New York changed dramatically since the beginning of this case. Mobile sports betting was launched earlier this year with nine operators, after the retail sports betting market first began in 2019.
The state has also been working on obtaining licenses for three casinos to be operated in New York’s downstate area, including New York City.
