Good and Bad News for New York Daily Fantasy Sports Sites

I’ve got good news and bad news for daily fantasy players in New York. First, the good news: DraftKings and FanDuel will continue to operate in New York through January and possibly the rest of the NFL season. In an emergency appeal on Friday, appellate judge Pain Feinman said New York daily fantasy sports sites may continue operating in through January until a full panel of judges decides whether the companies may continue operating throughout the appeals process.

The bad news actually came a little earlier in the day on Friday. New York Supreme Court Justice Manuel Mendez sided with NY Attorney General Eric Schneiderman in his argument that DFS meets the state’s definition of gambling. His ruling effectively shut down FanDuel and DraftKings on Friday, but the sites scrambled to an appeals court and got an emergency stay on the order. Business will continue on as normal for customers while the big DFS sites mount their legal strategies.

Basically, we got great news in the short term and not-so-great news in the long term. However, the bad news may not turn out to be all that bad in the even-longer-term. Justice Mendez’s decision was not a major surprise. All indications before the ruling indicated he would side with Schneiderman. It appears the big DFS sites were prepared as well because they were able to get to the appeals court that very same day and keep the lights on in New York. Their legal teams sure look to be earning their pay.

There is a still a chance that a future ruling determines daily fantasy sports to be exempt from New York’s definition of “gambling,” but that doesn’t look super likely. From what I can gather, the most likely outcome is that DFS is deemed to be gambling sooner or later. We can argue how much skill matters in fantasy sports until we turn blue in the face, but those arguments have no impact on the state’s legal definition of gambling.

New York state defines gambling as follows:

  • A person engages in gambling when he stakes or risks something of value upon the outcome of a contest of chance or a future contingent event not under his control or influence, upon an agreement or understanding that he will receive something of value in the event of a certain outcome.

It wouldn’t take a leap of the imagination to see how a judge may decide that fantasy sports do meet that definition. Fantasy contests do require you to risk something of value and offer the chance to win something of value. The only part of that definition that is even questionable in relation to fantasy sports is whether or not the outcome is under your control or influence. Sure, you could argue you have an influence on the outcome because you’re the one who drafts your team…. But on the other hand, you have no influence on how the players on your team actually perform.

But, even if New York does decide that DFS is gambling, that doesn’t necessarily mean it’s the end of the line. As we noted in a previous post, New York Assemblyman J. Gary Pretlow (who chairs the Committee on Racing and Wagering) said that they will probably do something to legalize DFS if the court rules against FanDuel and DraftKings.

What to Expect

It’s tough to make predictions in matters of politics and gambling, but I’m starting to think the next year will look something like this:

  • New York continues to operate in New York through January
  • The court deems fantasy sports apps to be gambling
  • Fantasy sites are forced out of New York for a while
  • NY lawmakers pass legislation to regulate, tax and possibly license fantasy sites
  • DraftKings and FanDuel re-enter the NY market with the full blessing of the state

Let me stress that this is just a very rough guess. I have no inside information and am not a lawyer. This is just an outcome that seems somewhat possible based on everything we’ve seen and heard from people in New York to date. Things could always change for the better or worse. The only way we’ll know for sure is when it all actually happens.

In the meantime, enjoy your fantasy contests in New York. At the very least, you have a few more weeks of fantasy football action.

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