Last week, the New York Supreme Court’s Appellate Division dealt a blow to a law authorizing daily fantasy sports contests in the state, by ruling the law directly violated the state constitution’s prohibition on gambling.

In 2016, Governor Andrew Cuomo signed a law to attempt to legislate fantasy sports, asserting they did not constitute gambling. The law set forth several regulations for fantasy sports, including consumer safeguards and taxation. However, several New York state residents brought a lawsuit, arguing the statute created an illegal exemption to the state Constitution’s prohibition on gambling; and that legalizing fantasy sports required a constitutional amendment subject to voter approval.

A ruling by the Albany County Supreme Court in 2018 was more equivocal: declaring the games unconstitutional, but ruling that state lawmakers could take daily fantasy sports out of the state penal law that penalizes illegal gambling. The appellate court gave more support to the law’s opponents: in addition to being unconstitutional, daily fantasy sports were not exempt from the penal code.

The appeals court held that daily fantasy sports involve a degree of chance, due to variables such as player injury, illness, bad weather or poor officiating.

With daily fantasy sports now struck down, speculation continues about whether New York state will legalize mobile sports betting as a source of revenue. Gaming regulators are now conducting market studies.

The state has 30 days to decide whether to seek review at the Court of Appeals.

This alert does not purport to be a substitute for advice of counsel on specific matters.

Harris Beach has offices throughout New York State, including Albany, Buffalo, Ithaca, Melville, New York City, Rochester, Saratoga Springs, Syracuse, Uniondale and White Plains, as well as New Haven, Connecticut and Newark, New Jersey.