When is a game of skill not a game of skill? Developers and operators of ‘skill-type’ games will tell you that this is a very old question. And it’s one that simply refuses to go away, as DraftKings and FanDuel, operating daily fantasy sports games in New York, can testify.
In a nutshell an appellate hearing this week upheld a decision from Acting Justice Gerald W Connolly who, in 2018, ruled that DFS is unconstitutional in the state. Connolly’s finding was that the state had unlawfully expanded gambling when it classified DFS as a skill-based game back in 2016.
Clearly that sets a worrying tone for the future of DFS in New York. But it’s inevitable that the situation will go to further appeal so for now, at least, operators can continue to offer fantasy sports.
Longer term? Well that’s hard to answer. This latest decision will ultimately hinge on that age old question of skill or chance and degrees of each therein. A cursory read through of the document suggests as much.
It does, however, concede that skill has a part to play. “For purposes of this discussion, we accept the information considered by the Legislature indicating that IFS (interactive fantasy sports) contests are contests requiring skill,” it noted.
“For example, research demonstrated that lineups chosen by actual contestants beat those chosen at random and contestants improve their performance over time. Additionally, a very small percentage of IFS contestants receive a very large percentage of the prize money, suggesting that the skills exercised by this small percentage of winners actually affects the outcome of these contests.”
Crucially, the court added: “Nevertheless, skill and chance are not mutually exclusive; they often coexist. The determinative question is whether IFS contests involve a material degree of chance. According to the statement of agreed-upon facts, although participants in IFS contests may use their skill in selecting teams, they cannot control how the athletes on their IFS teams will perform in the real-world sporting events.”
The court’s view is that disparate factors including player injury or illness, unexpected weather conditions, poor officiating, a selected player having a particularly bad day or an unselected player having a surprisingly good day introduce an element of chance.
“In other words,” it said, “the skill level of an IFS contestant cannot eliminate or outweigh the material role of chance in IFS contests. Thus, we agree with Supreme Court’s interpretation and finding that plaintiffs met their burden to demonstrate beyond a reasonable doubt that Racing, Pari-Mutuel Wagering and Breeding Law article 14, to the extent that it authorizes or regulates IFS, is unconstitutional because it violates the prohibition against gambling in NY Constitution, article I, § 9.
For the time being, it is a case of business as usual for the big two DFS operators. In the words of DraftKings: “We believe the legislative action authorizing fantasy sports in New York was constitutional and in the best interests of taxpayers and fantasy sports fans.”
While for FanDuel, the anticipation is that this latest ruling does not mark a final say on the subject. “We expect that there will be an appeal and we’ll be able to continue to offer contests while that appeal is decided,” it said.