Just months ago, the New York legislature passed a much publicized law authorizing and regulating online fantasy sports in the state. That law has now come under attack. Four New York citizens – backed by an anti-gambling government reform group – filed suit last Wednesday against New York Governor Andrew Cuomo and the state gambling commission, alleging that New York’s new law violates the state’s constitutional prohibition on gambling expansion. The lawsuit, however, likely faces a lengthy, uphill climb.
Last November, New York became the epicenter of the highly publicized debate over the legality of fantasy sports, specifically “daily” fantasy sports (DFS), when New York Attorney General Eric Schneiderman issued cease-and-desist letters to the DFS industry’s two leading operators, DraftKings and FanDuel. According to Schneiderman, the companies’ DFS offerings constituted “illegal gambling” under New York law. As a result, he demanded that they stop accepting “wagers” from New York residents. The fight between the state’s attorney general and the DFS operators then took to the courts. There, the attorney general was able to obtain a preliminary injunction from a state judge ruling that there was a likelihood of proving DraftKings’ and FanDuel’s DFS contests ran afoul of New York’s constitutional and statutory prohibition of gambling. That order, however, was later stayed by the appeals court.
Schneiderman’s lawsuit was rendered moot – and most charges were eventually voluntarily dismissed by the attorney general[i] – when the New York legislature passed the “Interactive Fantasy Sports” law earlier this summer.[ii] Under the law, an “interactive fantasy sports contest” is defined as:
a game of skill wherein one or more contestants compete against each other by using their knowledge and understanding of athletic events and athletes to select and manage rosters of simulated players whose performance directly corresponds with the actual performance of human competitors on sports teams and in sports events.
The law also adopts language similar to that used in the federal Unlawful Internet Gambling Enforcement Act, which exempts fantasy sports contests meeting certain criteria from its broad prohibitions against online gambling operations. Accordingly, New York’s Interactive Fantasy Sports law requires that contest operators ensure that:
- The value of any prizes and awards offered to players is established and made known to such players in advance of the contest, and such value is not determined by the number of players or the amount of any entry fees paid by such players;
- All winning outcomes reflect the relative knowledge and skill of the players and are determined predominantly by accumulated statistical results of the performance of individuals in sports events;
- No winning outcome is based on the score, point spread, or performance of a single sports team, or any combination of such teams;
- No winning outcome is based solely on any single performance of an individual athlete in a single sport or athletic event; and
- No game or contest is based on any collegiate sport or athletic event, any high school sport or athletic event or any horse racing event.