‘Stop Predatory Gambling’ Files a Lawsuit Challenging New York’s Daily Fantasy Sports Law
A coalition of anti-gambling groups led by “Stop Predatory Gambling” has filed a lawsuit against FanDuel, DraftKings, and other daily fantasy sports in New York State. The group claims that the DFS companies did an “end run” around the New York Constitution when they convinced the state legislature to pass a bill legalizing fantasy sports in the state. The bill was passed in June and signed by Gov. Andrew Cuomo in August.
The group argues that the New York constitution prohibits most forms of gambling. Only horse racing, lottery games, and commercial casinos are legal in the state. Sports betting is not legal, and the groups take the view that DFS is sports betting.
Claims the Bill Is Unconstitutional
That might be academic, but the group’s lawyers could attack the very act of passing a law which circumvents some aspect of the constitution. In those cases, a constitutional amendment is mandated, which has a much higher threshold to passage. Whether a New York state court finds in favor of the group is another matter, but a legal challenge would cost FanDuel and DraftKings much-needed money, while leaving the issue in doubt for some months.
Neil Murrey’s Statement
Neil Murrey of Stop Predatory Gambling claims the New York State Legislature overstepped its bounds in pass the DFS bill. Murray said, “The Legislature does not have the power to change the constitution. Only the people do. This is legislative hypocrisy.”
Though the group seeks to have the new law overturned, FanDuel and DraftKings are going to be allowed to continue operations while the case is heard. Stop Predatory Gambling did not file to have an injunction placed on the companies during any trial.
Gary Pretlow on the Lawsuit
Those who back daily fantasy sports in New York expressed confidence that the DFS law would survive the legal challenge. Gary Pretlow, the Assemblyman who sponsored the bill, said he was confident the bill is on firm legal ground.
Assemblyman Pretlow countered Murrey’s contention about the premise DFS is gambling at all. He said, “The constitution is very clear that the Legislature has the authority to define what is and what is not gambling and we have determined that this is not gambling.”
DFS: A Game of Skill
The legislature defined daily fantasy sports as a game of skill, not a game of chance. That is an important legal definition, because placing bets on a game of skill is not necessarily considered gambling in a legal sense. If the legislature has the authority to distinguish gambling from gaming, then they have every right to declare daily fantasy sports is not gambling.
It is a debate which has raged since DFS first came under fire in October 2015. Opponents of daily fantasy sports pointed to the high percentage of money which goes to a relatively few professional DFS contestants — so-called “grinders”, because they spend a lot of time studying statistics and making predictions based on them. Grinders are estimated to win 91% of the winnings in DFS contests.
Though that figure was used by DFS opponents to undermine the popularity of the game, it actually has helped the case for FanDuel and DraftKings. If a relatively few number of players can win consistently enough to collect 90% of the prize money, then DFS must be a game of skill. Luck could not account for such a high level of success, at least not over a multiple-year span.
Eric Schneiderman’s Role
The law came about after Attorney General Eric Schneiderman sought to close down the sites in November 2015. That led to months of legal battles between the NY Attorney General’s office and the DFS companies. Eventually, DraftKings and FanDuel agreed to cease operations pending a September 2016 court case. In exchange, Schneiderman agreed that he would drop his litigation, if the New York State Legislature passed a fantasy sports bill before the September 2016 case.
That happened, seemingly clearing the way for FanDuel and DraftKings. The two companies spent $800,000 lobbying the New York legislature, informing them about the underlying statistics and why fantasy sports is different than a sports bet. A sports bet is placed on the outcome of one event or one pivotal moment in a game. Fantasy sports depends on a variety of factors — that is, somewhere between 8 and 10 individual players whose statistics are independent of one another.
Why Fantasy Sports Is Skill-Based
Filling out a DFS lineup also requires resource allocation, because owners rent the services of a player based on their (fantasy) salary cap figure. The team owner must therefore determine which players represent the best value for their cost, putting together an entire squad of successful players. The crunchiness of the rules lead to a contest where knowledge, skill, and risk management play a role.
Marc LaVorgna, a spokesman who represents both DraftKings and FanDuel, said his clients have no concern about this particular lawsuit. Using a sports analogy, Mr. LaVorgna said, “This is a layup — they have no case.“
