New York DFS Ruling Undercuts Legal Justification in Online Poker Bill New York DFS Ruling Undercuts Legal Justification in Online Poker Bill

A 2016 law that authorized Daily Fantasy Sports (DFS) in New York was deemed unconstitutional in 2018 and that decision was upheld last week by a state appellate court.

The law identified DFS contests as “a games of skill” and not a game of chance in order to get around a restriction in the state constitution that prohibits the expansion of most types of gambling. But the courts have ruled that just because a game involves skill does not mean it is not gambling.

Gambling in New York is defined in the State Penal Law 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 [or her] control or influence.”

After acknowledging that DFS—or Interactive Fantasy Sports (IFS), as it is referred to in New York law—involves an element of skill, the appellate court ruled that “nevertheless, skill and chance are not mutually exclusive; they often coexist. The determinative question is whether IFS contests involve a material degree of chance.”

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“Therefore, such contests constitute gambling if their outcomes depend to ‘a material degree upon an element of chance, notwithstanding that skill of the contestants may also be a factor therein,’ such that they are contests of chance,” it went on to state.

Though another appeal is likely, the latest appellate court ruling could be a death knell for online poker legislation currently working its way through the legislature.

Senate Bill S18A, which would legalize online poker in the state of New York, justifies legalizing the game based on its skill-game status, even specifically citing the 2012 case of U.S. v. DiCristina in which Judge Weinstein ruled that under federal law poker is predominantly a game of skill.

The bill even seeks to modify the definition of what constitutes gambling under state law by clarifying the definition of a “contest of chance” as “any contest, game, gaming scheme or gaming device in which the outcome depends [in a material degree] PREDOMINANTLY upon an element of chance.”

But the court also addressed what it saw as an attempt by lawmakers to redefine gambling in order to circumvent the restrictions of the constitution.

“Allowing the Legislature unfettered discretion to determine what is not gambling would render meaningless the constitutional prohibition on 'lottery or the sale of lottery tickets, poolselling, book-making, or any other kind of gambling’ ... Thus, IFS contests are not excluded from the constitutional meaning of ‘gambling’ merely because the Legislature now says that it is so.”

State Senator Joseph Addabbo Jr, sponsor of Senate Bill S18A, is also the sponsor of S17 which would legalize online sports betting. Addabbo believes the DFS ruling has “no bearing whatsoever on the legality of advancing mobile sports betting in the state of New York.”

However, he stopped short of proclaiming the same for online poker—perhaps because the two bills seek to legalize their respective games by referencing different aspects of state law.

Instead of proclaiming online sports betting as a game of skill, S17 addresses the constitutional restrictions on the expansion of gambling in the state by targeting the exception for casino gambling identified in the constitution.

The bill would require the gaming server for internet sports wagers be located on casino premises and “clarifies that mobile sports wagers are made and take place upon acceptance at the location of the server, regardless of the physical location of the individual placing a wager.”

The state of New Jersey took a similar position when legalizing online gaming. Despite a constitutional requirement that gambling in the state be confined to Atlantic City, the state authorized gambling over the internet based on its assertion that the transaction takes place at the gaming server which are required to be on site in the land-based casinos of Atlantic City.

While it is still possible to amend the proposed online poker legislation to more closely follow the path of online sports betting, there may not be enough support to get the bill over the finish line.

New York’s highest-ranking politician, Governor Andrew Cuomo, is skeptical of the legal argument put forth by Addabbo in trying to advance online sports betting into law.

A top-ranked official in the Cuomo administration told The Buffalo News last week that the governor is still of the belief that gambling over the internet can only be authorized by amending the state constitution. But he also acknowledged that the governor is known to change his mind.