How a DFS Lawsuit Could Stall New York’s Online Poker Efforts

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The New York Supreme Court could be the home to another obstacle for legal online poker in that state.

A lawsuit challenging the legality of New York’s daily fantasy sports law was filed last week with the New York Supreme Court.

The lawsuit is contesting the New York DFS law on the grounds that the New York legislature overstepped its authority by classifying DFS as a game of skill, instead of changing the state’s constitution to allow DFS contests as an expansion of gambling.

The lawsuit lists four people who either have, or know someone with, a gambling disorder as plaintiffs, and is being backed by Stop Predatory Gambling, an advocacy group that opposes gambling in all its manifestations.

The point of contention

The basic question the lawsuit is asking is whether or not the legislature has the power to categorize something that has characteristics of gambling as a skill game, thereby eliminating the need to pass a constitutional amendment to legalize and regulate it as gambling.

Per the New York State Constitution:

“No law shall be passed… except as hereinafter provided, no lottery or the sale of lottery tickets, pool-selling, bookmaking, or any other kind of gambling, except lotteries operated by the state …”

Legal analysts seem skeptical of the lawsuit’s chances, but the suit is not without merit, and may not be the “layup” the DFS industry and New York lawmakers are making it out to be.

A joint statement from FanDuel and DraftKings reads:

“The state constitution specifically gives the legislature the power to define what is – and what is not – gambling, and the legislature has done so a number of times in the past and long before the emergence of fantasy sports. The Attorney General, who certainly has had some strong opinions about fantasy sports, has clearly stated he will enforce and defend this new law. This is a layup – they have no case.”

Gary Pretlow, who championed the bill in the Assembly, admitted that some members raised this same constitutional concern when the bill was being discussed in the legislature, but Pretlow insisted the legislature was acting within its rights when it classified fantasy sports as a game of skill and therefore “not subject to the provisions of the constitution,” according to Legal Sports Report.

Does this theory hold water?

Despite their confidence, as PocketFives.com’s Adam Small and Legal Sports Report’s Dustin Gouker noted during a Twitter conversation, if all it takes is a legislative dictate to make something “not gambling,” the New York Constitution is little more than a piece of paper with no real authority when it comes to gambling law.

In addition to this, New York Attorney General Eric Schneiderman found DFS to be gambling in an opinion from 2014, and Schneiderman isn’t the only AG in the US to issue such an opinion.
In his opinion, Schneiderman wrote in part:

The New York State Constitution has prohibited bookmaking and other forms of sports gambling since 1894. Under New York law, a wager constitutes gambling when it depends on either a (1) “future contingent event not under [the bettor’s] control or influence” or (2) “contest of chance.”

So-called Daily Fantasy Sports (“DFS”) wagers fit squarely in both these definitions, though by meeting just one of the two definitions DFS would be considered gambling. DFS is nothing more than a rebranding of sports betting. It is plainly illegal.

In regards to the lawsuit, Schneiderman said that as the AG, he will defend the newly passed law. “Today, the Governor has signed a bill that amends the law in order to legalize daily fantasy sports contests, with consumer protections for New York players. I will enforce and defend the new law,” Schneiderman said when the DFS bill was signed into law in August.

Online poker legalization just became more difficult

Online poker supporters should be paying careful attention to this lawsuit.

If, as the lawsuit contests, DFS requires a constitutional amendment to be legalized, online poker legalization would also require a constitutional amendment.

The game of skill designation applied to DFS is precisely how the New York Senate crafted its online poker legalization bill that gained a lot of traction this year. The bill passed in the Senate (by a 53-5 vote) before receiving the cold shoulder in the Assembly.

New York was expected to reconsider online poker in 2017, but it’s unlikely they’ll act on a bill until the DFS lawsuit is decided. In effect, by its mere existence, the DFS lawsuit will stall online poker legalization.