A New York judge has ruled the state had no authority to reclassify DFS as a game of skill in 2016 to circumnavigate the constitutional ban on gambling.
In New York, all forms of gambling that are not explicitly allowed by the constitution are prohibited. According to the constitution, the act of gambling occurs when an individual
stakes or risks something of value upon the outcome of a game of chance – a game of chance being defined as any event in which the outcome depends upon an element of chance in a material degree.
Up until 2015, Daily Fantasy Sports (DFS) was tolerated in New York due to the contests having a carve-out in the Unlawful Internet Gambling Enforcement Act. However, following an advertising blitz at the start of the 2015/2016 NFL season, New York Attorney General Eric Schneiderman issued a cease-and-desist letter against companies operating in New York, claiming their activities violated the constitution.
The following year, New York´s legislature passed a law reclassifying DFS as a game of skill in order to circumnavigate the constitution. A coalition of anti-gambling campaigners subsequently contested the new law, claiming that the regulation of DFS required a constitutional amendment via a voter referendum because the outcome of Daily Fantasy contents depended on an element of chance.
Judge Rules in Favor of Anti-Gambling Campaigners
The case – White, West, Wellins, and Remington vs. Andrew Cuomo and the New York State Gambling Commission – was allowed to go ahead last August after the State Supreme Court denied the state´s motion to dismiss. Hearings took place earlier this year and, yesterday, Acting Supreme Court Justice Gerald W. Connolly released his written verdict on the case – finding that New York´s legislature did not have the authority to reclassify DFS as a game of skill and allow it as a legal gambling activity.
Significantly for the future likelihood of an appeal, the judge stated that no amount of skill by the person playing DFS games can predict future athletic performances, and therefore considerable elements of chance exist. However, he did add the caveat that the skill of participants in predicting future athletic performances can influence how successful they are in winning DFS contests. If an appeal is forthcoming, it could take up to three years for the case to be re-heard by the State Supreme Court.
How the Ruling Affects Regulated Online Poker in New York
Proposals to regulate online poker in New York have been on the table for several years, but – although they have often come close to passing – they have never made it across the threshold. Several reasons have been suggested for the legislature´s inability to regulate online poker in New York, including the saturation of existing legalized gambling and fears of cannibalization on New York´s fledgling brick-and-mortar casino industry – which, to date, has failed to meet its projected financial targets.
Perhaps of more significance – considering the ruling in the DFS case – is the fact that the regulation of online poker in New York is dependent on the legislature reclassifying poker as a game of skill. Although there is no doubt in my mind a far higher degree of skill exists in poker than it does in DFS contests, my opinions may not count for much if a law to regulate online poker in New York is subsequently contested by an anti-gambling coalition and heard in court.
The key to the outcome of any potential court case would be that no amount of skill by the person playing poker can predict which community cards will be dealt. And, although the caveat exists the skill of poker players can influence how successful they are at winning hands of poker, an element of chance still exists. This argument will undoubtedly further delay regulated online poker in New York until such time as after an appeal is heard in the DFS case – which could be up to three years away.