New York’s Highest Court Upholds Constitutionality of Law Allowing Fantasy Sports Betting

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By Thomas J. McNamara

The New York Court of Appeals, New York’s highest court, has upheld the constitutionality of a law allowing fantasy sports betting in New York, in a close 4-3 decision.  White v. Cuomo, 2022 WL 837573 (2022).   The trial court, and the Appellate Division, had previously held that the New York law authorizing fantasy sports betting ran afoul of New York’s Constitution, which outlaws gambling, with narrow exceptions.  The rationale of the Court of Appeals was that fantasy sports contests are more games of skill, rather than chance.  The Court held that since the outcome of the contests are predominantly dependent upon the skill and knowledge of the participants, rather than chance, they did not constitute “gambling.”  In fantasy sports, the participant selects the players on his or her team, and does not bet on the outcome of any particular sporting event.

The plaintiffs had argued that fantasy sports were primarily a game of “chance,” because the performance of the selected athletes was  beyond the control of the bettor.   That was of course disputed by DraftKings and FanDuel, in “friend of the court” briefs filed by the two largest fantasy sport operators in support of the constitutionality of the legislation.

In ruling that fantasy sports involved predominantly skill, the Court cited studies finding that lineups of skilled participants were more successful than randomly generated lineups over 80 percent of the time.  In a stinging and lengthy dissent, however, three Court of Appeals justices declared that sports betting is gambling, whether fantasy or not.  The dissent analogized the majority opinion to the scene in the movie Casablanca where the police announce that Rick’s Café is being shut down and the police captain says he is “shocked, shocked” to find that gambling was going on, while at the same time making sure to collect his own winnings before closing the place.

On a different, but related note, New York legalized online betting on sports events themselves in January of this year.  The legality of the direct betting on sports events is based upon a legal loophole in the New York Constitution, which permits betting at certain Native American casinos located within New York.  By physically locating the computer servers which process the betting at legal casinos within New York, the New York Legislature took the position that online and mobile sports betting was actually occurring at the legal authorized casinos.  Legalized sports betting in New York has seen wagers of more than $4 billion placed in just the first ten weeks alone.  With billions of dollars in tax revenue potentially at stake, it is perhaps not surprising that New York courts and legislatures have become creative and flexible in their interpretations of what constitutes legalized gambling.

Thomas J. McNamara is a member of the Law Firm of Certilman Balin Adler & Hyman, LLP