181 A.D.3d 76
N.Y. App. Div.2020Background
- In 2016 the Legislature added article 14 to the Racing, Pari‑Mutuel Wagering and Breeding Law to register, regulate, tax and declare interactive fantasy sports (IFS) contests not to be "gambling."
- Plaintiffs (state taxpayers harmed by gambling) sued for a declaratory judgment and injunctive relief, arguing article 14 violates NY Const art I, § 9 (the anti‑gambling clause).
- Parties submitted an agreed statement of facts describing IFS: entry fees and prize pools, skill involved in roster selection, but outcomes depend on real‑world athlete performances (injury, weather, officiating), i.e., chance.
- Supreme Court granted partial summary judgment to plaintiffs, holding article 14 unconstitutional insofar as it authorizes/regulates IFS, but upheld the statute’s provision excluding IFS from the Penal Law definition of gambling.
- The Appellate Division majority affirmed that the authorization/regulation provisions are unconstitutional (IFS are contests of chance under Penal Law definitions), declined to sever the decriminalization clause (§1400(2)), and preserved the prohibition on unregistered contests (§1412).
Issues
| Issue | Plaintiff's Argument (White) | Defendant's Argument (Cuomo) | Held |
|---|---|---|---|
| Whether article 14’s authorization/regulation of IFS violates NY Const art I, § 9 (anti‑gambling) | IFS are contests of chance/gambling; statute therefore authorizes prohibited gambling | Legislature rationally found IFS are predominately skill and not gambling; deference warranted | Held unconstitutional: authorization/regulation of IFS permits gambling and violates art I, § 9 |
| Proper interpretive standard for “gambling” under art I, § 9 | Apply Penal Law definition (contest of chance; material degree of chance; future contingent event) | Argues a different (Ellison) dominant‑element test; urges deference to legislative findings | Court applied Penal Law definitions (material degree of chance; future contingent event) and found IFS met that definition |
| Whether provision excluding IFS from Penal Law definition (§1400(2)) is a permissible decriminalization | §1400(2) is invalid because it attempts to exempt what is constitutionally gambling | Legislature may decriminalize or remove activity from Penal Law definitions and had authority to do so | Majority: invalidated §1400(2) (refused to sever it from rest of article because legislature would not have preserved decriminalization alone) |
| Severability / preservation of any parts of article 14 (e.g., §1412 prohibiting unregistered contests) | Entire article should be invalidated | Some provisions (like decriminalization) are severable; §1412 permissible as it prohibits unregistered contests | §1412 preserved (prohibits unregistered IFS); majority refused to sever §1400(2) and invalidated it as well |
Key Cases Cited
- Dalton v. Pataki, 5 N.Y.3d 243 (2005) (Court of Appeals’ approach to interpreting the anti‑gambling provision and distinguishing standards of review)
- People ex rel. Ellison v. Lavin, 179 N.Y. 164 (1904) (articulated dominant‑element skill vs. chance test in a statutory lottery context)
- People ex rel. Sturgis v. Fallon, 152 N.Y. 1 (1897) (Constitutional anti‑gambling clause delegates power to Legislature to prescribe penalties and enact implementing laws)
- Matter of Hynes v. Tomei, 92 N.Y.2d 613 (1998) (severability test — whether Legislature would have preferred statute with invalid part removed)
- United States v. Carolene Products Co., 304 U.S. 144 (1938) (rational‑basis deference where legislature’s factual determinations are fairly debatable)
- Lincoln Bldg. Assoc. v. Barr, 1 N.Y.2d 413 (1956) (judicial review limited to whether Legislature rationally determined underlying facts)
- Ramesar v. State of New York, 224 A.D.2d 757 (1996) (exceptions to constitutional gambling prohibition must be strictly construed)
- Molina v. Games Mgmt. Servs., 58 N.Y.2d 523 (1983) (interpretation of gambling prohibition and scope of permissible exceptions)