Daily Fantasy Sports Deemed Legal by New York’s Highest Court

Daily fantasy sports are games of skill rather than games of chance, making them legal under state law, New York's highest court has ruled.

The New York State Court of Appeals on Tuesday reversed two lower court decisions that found DFS were games of skill — thus in violation of a constitutional provision that prohibits gambling outside of state lotteries, horse racing and charitable bingo games.

"This is the end of the road of the debate against the legality of DFS in New York," said Daniel Wallach, founder of Wallach Legal LLC, a law firm focused on sports wagering and gaming law.

Using a test that weighs which factor — skill or chance — is more dominate when playing an "Interactive Fantasy Sports" game, the high court ruled 4-3 to uphold a 2016 law that codified the practice as a skill.

“Evidence presented to the legislature indicated that outcomes in IFS contests are predominantly based on skill,” said Chief Judge Janet DiFiore. “Studies showed that skilled players achieve significantly more success in IFS contests and that rosters of skilled human players were more successful in IFS contests than randomly generated lineups over 80% of the time.”

The New York Supreme Court Appellate Division had viewed DFS — where players compete for prizes  in contests tied to pro athletes' in-game performances — effectively as sports betting in a different form. Their decision centered on a Penal Law and looked at whether an outcome depends on a "material degree upon an element of chance".

"Applying the predominance test instead of the materiality test made all the difference in the world. It was outcome determinative," said Wallach.

Judge Rowan D. Wilson, who wrote the dissent, agreed with the lower court's interpretation.

"Aggregating several bets involving different players into a point total that is pitted against point totals of other bettors does not transform gambling into something else," Wilson said.

Wilson added that today's decision is an "affront to the importance of our Constitution and the role of the courts — in particular this Court — in upholding the Constitution and defending it from ordinary legislative incursion."

Sports Betting

New York sports betting has gotten around the constitutional prohibition, because it is controlled by tribal casinos, which are subject to federal regulation under the Indian Gaming Regulatory Act.

Until recently legal sports betting was limited to in-person bets at those casinos. In 2021 lawmakers expanded the industry to online and mobile play, by allowing tribes to hold licenses on their federal-regulated land.

Daily Fantasy Sports companies, many of which also operate sports betting apps, had been operating in the state for years despite the previous rulings.

Today's ruling is in line with decisions in other states, which have largely settled their DFS debates.

The decision likely puts an end to any further challenges, as the U.S. Supreme Court is not likely to take up a state DFS case.