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New Challenge to Daily Fantasy Sports in New York

A group of New York citizens backed by the anti-gambling group Stop Predatory Gambling has filed a lawsuit against New York Governor Andrew Cuomo challenging the constitutionality of the bill that legalized daily fantasy sports in the state. The lawsuit contends that the law violates the Constitution of the State of New York because a constitutional amendment is needed to legalize a new form of gambling.  This is the latest development in the ongoing legal battle over  daily fantasy sports in New York.

In November 2015, New York Attorney General Eric Schneiderman issued cease and desist letters to DraftKings and FanDuel—the two largest daily fantasy sports operators—ordering them to stop operating in New York, alleging that their operations constitute illegal gambling under New York state law.  Only days later, both DraftKings and FanDuel filed lawsuits seeking to prevent Attorney General Schneiderman from banning their operation within the state.  Before those lawsuits could be adjudicated, the state legislature passed Senate Bill S8153, legalizing daily fantasy sports through the registration and regulation of “interactive fantasy sports contests,” which the bill defines as “games of skill.”  Senate Bill S8153 was signed into law by Governor Cuomo on August 3, 2016, in time for the New York Gaming Commission to issue temporary permits to several of the largest daily fantasy sports operators prior to the start of the 2016 NFL season.

This latest lawsuit, challenging the constitutionality of S8153, alleges that the law mischaracterizes daily fantasy sports as games of skill outside the state’s definition of gambling, and that daily fantasy sports—or “interactive fantasy sports contests”—are in fact a form of gambling that falls within the state constitution’s express prohibition against gambling.  As a result, the suit contends that a constitutional amendment was needed to legalize daily fantasy sports.

In response to this suit, a spokesperson for DraftKings and FanDuel stated, “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.”

It will be interesting to see how this latest challenge to daily fantasy sports in New York develops and whether the New York Supreme Court will get the chance to weigh in on the constitutionality of the law that brought daily fantasy sports back to  New York—the largest market in the United States and home to the headquarters of daily fantasy sports operator FanDuel.  Check back for updates as this saga continues to unfold.

Copyright © 2020, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume VI, Number 284

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About this Author

James Mattinson Blockchain Technology and Digital Currency Lawyer Sheppard Mullin Washington DC
Partner

Jim Gatto is a partner in the Intellectual Property Practice Group in the firm's Washington, D.C. office. He is also Co-Team Leader of the firm's Digital Media Industry and Social Media and Games Industry Teams, Blockchain Technology and Digital Currency team, and Team Leader of the firm's Open Source Team. 

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Mr. Gatto leverages his unique combination of nearly 30 years of IP experience, business insights and attention to technology trends to help companies develop IP and other legal...

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Mark Patrick is an associate in the Intellectual Property Group Practice in the firm's Washington D.C. office.

  • J.D., American University, Washington College of Law, 2015

  • B.S., University of Maryland,

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