On March 22, 2022, the New York Court of Appeals, in a 4-3 decision upheld the legality of New York’s Interactive Fantasy sports law, finding that New York’s Constitutional prohibition on expanding gambling does not encompass skill-based competitions in which participants who exercise substantial influence over the outcome of a contest are awarded predetermined prizes by a neutral operator.
In analyzing the history of the constitutional prohibition on gambling in New York, the court determined the historic test in New York for games of chance, as reflected in 1894, was whether the element of chance is the “dominating” element that determines the result of the game. This was the standard in use in New York for many years, until the legislature adopted the Penal Law in 1965, altering the standard to a “material degree” standard, but this standard is not the measure of the constitutional parameters of gambling. Quoting Dew-Becker v. Wu – the Ilinois Supreme Court case most recently to examine the subject, the Court agreed that it is now “widely-recognized” that Interactive Fantasy contests are predominantly skill-based on competitions.
The court did not entirely ignore plaintiffs contention that chance plays some role in the outcome of fantasy contests, but confirmed that the legislative record demonstrated that the games are predominantly games of skill, a conclusion that is firmly grounded in evidence and logic. Thus, fantasy sports contests are not gambling within the definition of “contests of chance.”
Similarly, the court went on to conclude that fantasy contests are also not “bets or wagers” on future contingent events outside the contestants’ influence or control. Citing the long history of contests integral to the fabric of American social life, such as golf tournaments and televised game shows, the court made clear that not every contest that involves monetary stakes constitutes gambling. Rejecting the claim that IFS contests cannot be games of skill because they involve the performance of others, the Court made clear that the fantasy competition is a distinct contest, measured in relative terms against the performance of other contestants, not the outcome of a particular real-life athlete or teams performance.
In light of this decision, New York’s Gambling Commission should be in position to move forward with licensing of fantasy sports operators under the now-upheld law, including the licensing of new operators. If you are an operator of IFS seeking to be licensed in New York and looking for assistance, please feel free to contact Nick Jackson, Managing Director of ZG Gaming Solutions, at nick@zggamingsolutions.com.
