New Twist in New York Daily Fantasy Sports Landscape

Written by Allie K. Haling and Ryan Endsley

On Wednesday, November 28, 2018, the New York State Office of the Attorney General, filed the state’s notice of appeal with the New York Appellate Division seeking a reversal of New York Supreme Court decision from last month. New York Supreme Court Judge Gerald Connolly’s decision on October 26, 2018 struck down a state law legalizing daily fantasy sports, declaring the law unconstitutional. The New York Supreme Court is equivalent to the trial court level in other states.

In the October decision, the Court had found that legalizing daily fantasy sports required an amendment to the state constitution and not merely passage of a statute. As a result of Connolly’s decision, the New York Gaming Commission, which had previously regulated daily fantasy sports, was poised to step back from its regulation of daily fantasy sports. Gaming Commission spokesman, Brad Maione, was quoted at the time, as saying “[s]ince the notice of entry was filed, the Commission no longer has a role in regulating DFS”[1] and all mention of daily fantasy sports had been removed from the Gaming Commission website.

A complicating factor in interpreting Connolly’s decision is that the decision upheld the legislature’s removal of criminal penalties for daily fantasy sports operators. This created a tenuous relationship between the state’s ability to regulate daily fantasy sports and the tool available to enforce any regulation. Essentially, daily fantasy sports entities were in an unregulated no-man’s land where they were not legally authorized to conduct business in the state of New York, but were not subject to criminal penalties for unlawful operation. Significant further legislation would have been necessary to enable enforcement by the state.

According to Maione, the appeal has triggered an automatic stay of enforcement of the earlier ruling.[2] An automatic stay would mean that daily fantasy sports companies, including FanDuel and DraftKings, will be allowed to operate in New York while the state appeals Connolly’s decision. A stay would also result in the Gaming Commission resuming its regulations of the industry. The appeal will likely not be heard until mid-2019, at the earliest, since the state has six months to perfect its appeal.[3]

[1] https://buffalonews.com/2018/11/19/daily-fantasy-sports-contests-operating-on-their-own-in-new-york/

[2] https://www.democratandchronicle.com/story/news/politics/albany/2018/11/28/draftkings-fanduel-get-apparent-reprieve-new-york/2140861002/

[3] https://www.law.com/newyorklawjournal/2018/11/28/decision-striking-down-daily-fantasy-sports-regs-in-ny-headed-for-appeal/