38 N.Y.3d 209
N.Y.2022Background
- In 2016 the New York Legislature enacted article 14 (Racing, Pari‑Mutuel Wagering & Breeding Law) to authorize and regulate interactive fantasy sports (IFS), finding IFS contests predicated on participant skill and not constitutionally prohibited gambling.
- IFS mechanics: contestants pay entry fees to assemble virtual rosters from real athletes, score points from those athletes’ real‑world performances, and compete against other entrants; prizes are required to be predetermined and awarded by a neutral operator.
- Prior to enactment the Attorney General sued DraftKings/FanDuel (2015), alleging IFS were illegal gambling; that litigation and public hearings informed the Legislature’s inquiry and findings.
- Plaintiffs then sued, seeking a declaration that article 14 violates NY Const. art. I, § 9; Supreme Court and the Appellate Division invalidated portions of article 14, applying the Penal Law’s “contest of chance” standard.
- The Court of Appeals reversed: it adopted a constitutional meaning of “gambling” focused on games dominated by chance or wagers where entrants merely stake and split a pooled fund, and upheld article 14 under the strong presumption of constitutionality.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether article 14 violates NY Const. art. I, § 9 by authorizing IFS | IFS are gambling because outcomes depend materially on chance (athletes’ performance outside contestants’ control) | Legislature reasonably found IFS are skill‑based contests for fixed prizes and thus not gambling | Reversed lower courts; article 14 does not violate art. I, § 9 — statute upheld |
| Are IFS "games of chance" under the Constitution | IFS involve a material element of chance and thus fall within the constitutional ban | IFS are predominately skill‑driven; the correct test is whether chance is the dominating element | Court adopts the historic “dominating element” test and finds skill predominates in authorized IFS |
| Are IFS "bets or wagers" (pooled wagering) | Entry fees effectively create a wagering pool payable to winners — akin to betting on sports | Article 14 mandates predetermined, fixed prizes paid by a neutral operator, not a prize that expands/contracts with entries — so not a prohibited wager | Court holds fixed‑prize structure and neutral operator distinction mean IFS are not unconstitutional bets/wagers |
| Proper standard of review and role of legislative facts | Plaintiffs: constitutional prohibition requires faithful judicial definition, not legislative fiat | Defendants: statutes get strong presumption of constitutionality; courts defer where legislative factfinding is reasonably supported | Court applies strong presumption of constitutionality and accepts legislature’s factual finding that authorized IFS are skill‑based |
Key Cases Cited
- People ex rel. Ellison v. Lavin, 179 NY 164 (N.Y. 1904) (adopts the “dominating element” test distinguishing games of chance from games of skill)
- People ex rel. Lawrence v. Fallon, 152 NY 12 (N.Y. 1897) (distinguishes prize contests from wagers where entrants create and split a pooled stake)
- Dalton v. Pataki, 5 NY3d 243 (N.Y. 2005) (strong presumption of constitutionality for legislative enactments)
- LaValle v. Hayden, 98 NY2d 155 (N.Y. 2002) (plaintiff bears the heavy burden to show constitutional invalidity beyond a reasonable doubt)
- Matter of Kuhn v. Curran, 294 NY 207 (N.Y. 1945) (constitutional interpretation should reflect what language conveys to an intelligent, careful voter)