The question in this case is whether the statute permitting fantasy sports betting violates the anti-gambling provision of the state Constitution.
Article I, § 9 of the state Constitution prohibits any “lottery or the sale of lottery tickets, pool-selling, book-making, or any other kind of gambling.” The Legislature has implemented this mandate through a series of criminal provisions that prohibit gambling. The current prohibition, enacted in 1965, imposes criminal liability on anyone who operates a gambling enterprise or activity, but not on individual gamblers. Under the Penal Law definition of gambling, one gambles when he “stakes or risks something of value upon the outcome of a contest of chance or a future contingent event not under his control or influence.” Further, a “contest of chance” is one where “the outcome depends in a material degree upon an element of chance, notwithstanding that skill of the contestants may also be a factor therein.”
This case involves fantasy sports betting. In general, fantasy sports are a game where contestants choose a team of players in a particular sport and then “play” their team against a team chosen by another contestant. A team wins if its players outperform the players on the other team. Some versions of fantasy sports charge contestants a fee to participate and award prizes to winning contestants–what has become known as fantasy sports betting. In 2015, the state Attorney General sued several of the companies that offer fantasy sports betting on the theory that those contests constituted gambling under the Penal Law.
While the Attorney General’s action was pending, however, the Legislature enacted measures to legalize fantasy sports betting. Specifically, the new law provided that fantasy sports betting does not constitute “gambling” under the Penal Law. The new law created a regime of regulation and taxation authorizing fantasy sports betting. The Attorney General subsequently voluntarily discontinued her action.
Plaintiffs commenced this action for a declaratory judgment that the new law was unconstitutional and an injunction. Supreme Court agreed and invalidated the law in part. The court concluded that fantasy sports betting was gambling within the meaning of the Constitution, and that the Legislature’s decision to authorize fantasy sports betting was therefore unconstitutional. In the court’s view, fantasy sports betting was basically sports betting, which the Constitution clearly prohibited. Nevertheless, the court upheld the provisions decriminalizing fantasy sports betting, deferring to the Legislature’s discretion to decide what conduct should be subject to criminal penalty.
A divided panel of the Third Department held the law unconstitutional in its entirety. The majority adopted the statutory definition of “gambling” as the constitutional standard. Under that definition, the majority concluded that fantasy sports betting constituted gambling because it involved a material element of chance and turned on future events not under a contestant’s control. Unlike Supreme Court, however, the majority also struck down the provisions decriminalizing fantasy sports betting. In the majority’s view, the Legislature intended replace the criminal prohibition on fantasy sports betting with a comprehensive system of civil regulation. But upholding only part of the law would, in effect, allow fantasy sports betting to continue without the civil regulation the Legislature sought to impose. Because the majority thought the Legislature would not have intended such a result, it held that the decriminalization provisions were not severable from the unconstitutional aspects of the law and declared the entire thing void.
A single judge dissented. The dissenter concluded that there was a rational basis for the Legislature’s decision that fantasy sports betting did not turn in “material degree upon an element of chance” or turn on “a future contingent event not under the contestants’ control or influence.” As a result, the dissenter would not have disturbed the Legislature’s decision that fantasy sports betting was not gambling.
The State appealed to the Court of Appeals as a matter of right.
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