Could New York State Shut Down Daily Fantasy Sports Games Within Its Borders?

On Thursday morning, the future of daily fantasy sports games in New York state started to resemble the future of the New York Knicks. Just a couple of days after the Knicks fired team president Steve Mills, a court decision put the legality of DFS contests in jeopardy.

The New York State Supreme Court upheld an earlier ruling by Justice Gerald W. Connolly. Connolly ruled over a year ago that the state’s 2016 statute to allow fantasy games is unconstitutional.

What fueled the DFS legal decision Thursday?

The legality of fantasy sports contests has been a contentious issue in New York for several years. The 2016 law was an attempt to settle the issue.

That law defined the games as games of skill and thus attempted to preclude them from a ban on games of chance in the New York state constitution. That didn’t end the debate, however. It actually just added fuel to the fire.

Immediately after the state enacted the law, a group of citizens filed suit. The group argued that the state’s constitution does not give the Legislature the authority to expand gambling.

The only route for doing so, the complaint stated, was through amending the constitution. Rivers Casino eventually joined the plaintiffs, arguing that if commercial casinos had to wait for a voter referendum to start operations, DFS companies should have to follow the same process.

In 2018, Connolly issued his ruling. The state appealed, however, bringing the action forward to Thursday.

Anytime a state court rules a law unconstitutional, that invalidates that law, in theory. All hope is not lost for companies like DraftKings and FanDuel, however.

The state’s course of action on DFS

There is still an avenue of appeal left for the state. While it awaits an appeal on part of the Supreme Court’s decision, the state can also petition for a stay on the court’s ruling.

If granted, that would allow DFS operators in New York to continue doing business. That might only last until the appellate court rules, however.

If the state strikes out on this last-ditch attempt to salvage its 2016 measure, that could be the final hurrah. In that scenario, DraftKings and FanDuel might have to immediately and until further notice cease accepting DFS entries in New York.

At that point, the only path forward for legal DFS in New York would be the same as what casinos like Rivers endured. Amending the state’s constitution is an intentionally arduous and long process that takes years even if successful.

Because of that possibility, the Legislature may get right to work on the issue. If the worst-case scenario happens, it will already be off to a head start.

What the Legislature can do in the meantime on the issue

In this view of the constitutional language regarding gambling expansion, the only thing the Legislature can do is propose amendments to the state’s voters. It is actually the people of the state at large who decide whether to allow new forms of gambling.

While it’s a slow process and a lot of things could go wrong, going this route would insulate any further gambling expansion from these types of lawsuits. It could also allow the state to kill two birds with one stone.

The state Legislature could draft one big gambling expansion amendment proposal that includes everything the state has already commissioned a study on. That includes online sports betting, in-stadium sportsbooks and new brick-and-mortar casinos.

The Legislature could throw DFS in there for good measure. Then, if approved by voters, the issue would finally be settled for good.

The state may still wish to avoid that process if it can, however. That’s why New Yorkers should expect the litigation around the 2016 law to continue.

It’s uncertain when New Yorkers should expect a final ruling on the matter. In the meantime, nothing will likely change, but long-term, the prospects are as murky as any game of chance.