DFS: Illegal in N.Y.—and Very Much in Business

A judge has nullified the 2016 state law permitting daily fantasy sports. In response, the N.Y. Gaming Commission says it can no longer regulate the sector. Operators, meanwhile, are still taking customers.

New York’s murky sports betting situation has gotten murkier following an announcement from the state’s Gaming Commission that daily fantasy sports in the state is now officially unregulated.

The commission issued the decision after a state court judge ruled last month that a 2016 law permitting DFS is unconstitutional.

Which means DFS is now also officially illegal and will require an amendment to the state Constitution authorized by the state’s voters to become otherwise, a process that could take years.

But there’s a twist: the DFS sites—and there are more than a dozen of them currently taking action in New York, led by the giants of the sector, DraftKings and FanDuel—can continue to operate while the state appeals the judge’s ruling. That’s because the judge let stand a 2016 law that dropped any criminal penalties against them.

The state has until December 2 to file an appeal.

Operators, in the meantime, are claiming victory.

“The decision makes clear that the New York legislature’s decision to exclude fantasy contests from the definition of illegal gambling cannot be challenged in court. Accordingly, we will continue to offer fantasy sports to New Yorkers,” FanDuel said.

The company added, “We also believe in the benefits of regulation and will cooperate with efforts to permanently restore regulatory oversight.”

Meanwhile, the anti-gambling forces that ostensibly won their case are wondering where to go from here.

“We’re in that proverbial no-man’s land for the time being,” said Cornelius Murray, an attorney for the plaintiffs. “I think the dust will settle, but it’s kind of a vague, difficult-to-describe period right now.”

The confusion comes just as state lawmakers and the administration of Gov. Andrew Cuomo are considering how to move ahead with permitting broader sports betting. Industry insiders believe Cuomo is looking at including some sort of regulatory framework in his 2019 state budget, which he will unveil sometime in January.

In this regard, the momentum appears to be moving toward an initial launch at the state’s four commercial casinos and then extending it to Native American-owned casinos and possibly racetracks and OTB venues.

What’s less clear is how to deal with remote betting, which could be interpreted as a violation of exclusivity agreements between the tribal casinos and the state and may also require a change in the state Constitution.