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Fantasy sports ekes out a win after NY high court legalizes contests

In a close decision, the Court of Appeals determined fantasy sports is not actually gambling but rather a game of skill, reinforcing the multibillion-dollar industry's place in the Empire State.  

ALBANY, N.Y. (CN) — Fantasy sports betting is not technically gambling since it requires some skill, New York’s high court ruled Tuesday, paving open a legal carveout for the lucrative activity.

The squeaker of a 4-3 ruling from the Court of Appeals, which actually heard the case twice in six months, says that interactive fantasy sports (IFS) is a game of skill and not chance.

“Studies showed that skilled players achieve significantly more success in IFS contests and that rosters of skilled human players were more successful in IFS contests than randomly generated lineups of over 80% of the time,” Chief Judge Janet DiFiore wrote in the 25-page majority opinion.

DiFiore conceded that luck played “some role” in fantasy sports contests. “The points scored by participants correlate to the real-life performance of the athletes on the participant’s fantasy roster, and the IFS participants concededly cannot themselves influence the day-to-day performance of such athletes,” she noted.

Nevertheless, fantasy sports contestants face off against one another and have control over their own roster selection, DiFiore pointed out. She wrote that the citizens who brought the suit offered no real proof that fantasy sports was not skill-based, relying solely on the attorney general’s 2015 actions against the operators and a New York Times crossword puzzle that characterized the activity as involving “bets.”

Citing hundreds of years of state laws banning myriad gambling activities, including public lotteries, betting on horse races, and even a cigar-guessing contest, DiFiore also found that New York has allowed other contests that awarded monetary pries — from televised game shows to spelling bees. “Contests charging entry fees and awarding fixed prizes do not constitute gambling prohibited” under state law,” she wrote.

The odds that fantasy sports contests would be legalized in New York have shifted over the past few years.

In 2015, New York’s attorney general filed actions against two fantasy sports operators, but a year later the state passed a law allowing interactive fantasy sports betting by saying such contests were not gambling because participants used skill to select rosters and create their fantasy teams.

Several citizens then filed suit, alleging sports betting sites like FanDuel and DraftKings were granted an illegal carveout from New York anti-gambling laws. Trial court and appellate division rulings already had tossed the carveout as violating the state’s laws, and, despite a second bite at the apple, the odds were considered long for New York’s high court to overturn those decisions.

The state has created carveout for various forms of regulated gaming, but the state’s constitution continues to prohibit “pool-selling, book-making, or any other kind of gambling,” even though the state has never specifically defined what constitutes “gambling.”

Appellate courts sided with anti-IFS groups, and the Court of Appeals seemingly also did so when it heard oral arguments in October 2021. Inexplicably, however, the high court’s six-judge panel ordered another hearing a week later and last month revisited the issue.

The roster of judges hearing the cases changed before the second hearing, with Judge Eugene Fahey having retired and Presiding Judge Hector LaSalle taking the place of a recused Judge Michael Garcia.

Three of those judges remained opposed to fantasy sports in a lengthy dissent penned by Judge Rowan Wilson. Citing the famous exchange in “Casablanca” during which a police captain exclaimed he was “shocked, shocked to find that gambling is going on here,” before gratefully accepting his winnings, Wilson argued that many prohibited gambling contests include skill.

“Players skilled at counting cards are better able to win at blackjack than those who are unskilled, but that does not exempt blackjack, if played for money, from the prohibition on gambling,” he wrote. “The constitutional meaning of gambling does not turn on some weighing of skill and chance, but rather on what types of activities are commonly understood to constitute gambling.”

Wilson also decried the ruling’s effect on the separation of powers between the state legislature and judiciary. “The great damage done by today’s decision is not the legalization of gambling (which has existed, in an illegal but mildly tolerated form throughout the state’s history), but the affront to the importance to our Constitution and the role of our courts — in particular this court — in upholding the Constitution and defending it from ordinary legislative incursion,” Wilson wrote.

In nearly identical statements, spokesmen for both FanDuel and DraftKings said they were pleased with the ruling, which ensures New Yorkers access to fantasy sports.

Attorney Jeffrey Sherrin of O’Connell Aronowitz, who represented the citizens against fantasy sports, did not immediately return an email seeking comment.

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