New York's Authorization Of Fantasy Sports Ruled Unconstitutional

On October 26, 2018, Justice Gerald W. Connolly of the New York Supreme Court for Albany County ruled in White v. Cuomo (Index No. 5861-16) that New York's 2016 authorization of fantasy sports violated the state constitution. However, the court upheld those portions of the 2016 law that exempted fantasy sports from the definition of gambling under New York Penal Law.

By way of background, Article I, Section 9 of the New York Constitution broadly prohibits gambling (with certain exceptions) and authorizes the legislature to pass appropriate laws to prevent gambling offenses. Although the constitution does not define "gambling," Section 225.00[2] of New York's Penal Law defines the term as when a person "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."

In 2014, New York's attorney general brought a lawsuit against DraftKings and FanDuel alleging, among other things, that certain of their paid daily fantasy sports contests constituted illegal gambling in violation of New York law. Under the challenged contests, participants paid an entry fee, selected a "team" of multiple athletes in a particular sport and competed against other participants for cash prizes. Winning outcomes were determined by accumulated points based on the actual performances of the athletes. The New York Supreme Court for New York County held that fantasy sports contests with entry fees likely violated New York's prohibitions against gambling and preliminarily enjoined DraftKings and FanDuel from accepting entry fees for fantasy contests in the state. Schneiderman v. FanDuel, Inc., 2015 N.Y. Misc. LEXIS 4521 (Sup. Ct. N.Y. Dec. 11, 2015). The parties later settled the case while it was on appeal, after the New York Legislature enacted Chapter 237 of the Laws of 2016 (the 2016 Fantasy Sports Law). That law contained a legislative finding that fantasy sports did not constitute gambling as prohibited by New York Penal Law and expressly authorized fantasy sports contests meeting certain conditions.

Shortly after the enactment of the 2016 Fantasy Sports Law, a group of citizens filed the case captioned White v. Cuomo, seeking a declaratory judgment that the statute violated the state constitution's prohibition against gambling. The state subsequently moved to dismiss the...