Here We Go Again…

A few years ago I penned a post titled “Taxes and Daily Fantasy Sports: The Duck Test.” To remind everyone,

If it looks like a duck, walks like a duck and quacks like a duck, then it just may be a duck.

The duck test came up yet again yesterday in Albany, New York. The New York legislature passed a law legalizing Daily Fantasy Sports (DFS), even though the New York state constitution specifically prohibits gambling. The New York legislature statutorily said, “DFS isn’t gambling.” Yesterday, Judge Gerald Connolly said the legislature was wrong.

Last year a lawsuit was filed seeking a ruling on whether DFS is New York was legal. (The case is titled White, et. al., v. Cuomo, et. al.) Yesterday, the ruling came out. (My thanks to Legal Sports Report who published the ruling. LSR is a vital resource for anyone interested in sports betting in the United States. But I digress….) The issue is the same one I raised back in 2014.

Unfortunately, many states look at just an element of chance to determine if something is gambling. And there’s no doubt that daily fantasy sports have such an element. [emphasis in original.]

In this case, Judge Connolly ruled that based on the New York constitution if there’s a contest with an element of chance, a prize, and consideration and the constitution doesn’t state that activity isn’t gambling, it is gambling. Gambling is prohibited by the New York constitution, so the constitution will need to be amended in order for DFS to be legalized.

I expect this decision to be appealed, and a stay put on any adverse impacts for DFS in New York…for now. The problem is that the ruling seems right to me. If the New York prohibition against gambling was statutory, DFS could be legalized by statute. Since the New York prohibition is in the state’s constitution, a constitutional amendment appears to be necessary. This does not bode well for the future of DFS in New York.

Additionally, this ruling points out something that should be obvious regarding sportsbetting. The Supreme Court decision in Murphy v. NCAA allows sportsbetting to be legalized state-by-state. In some states, that just means passing a new law. In many states, though, that will mean amending the state’s constitution. Changing a state’s constitution takes a lot more time and effort.

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