New York Daily Fantasy Sports Suit: Will New Legislation Moot the Constitutional Challenge to DFS?

After the Third Department declared that DFS violates the New York Constitution’s ban on gambling, the thought was that the industry’s only savior would be the seven Judges of the New York Court of Appeals. But now there may be another way.

Yesterday, Senator Joseph Addabo introduced a new bill that could provide a way around the Third Department’s holding that DFS is prohibited gambling and effectively moot the case before the Court of Appeals. A quick refresher: The New York Constitution bans “gambling,” but doesn’t define the term. The Third Department held that the Penal Law definition of what is prohibited gambling governs the extent of the constitutional ban. That is, the Constitution prohibits any games the outcome of which depend upon chance in a material degree, notwithstanding that they may also involve the players’ skill.

Here’s the way around. In addition to providing a new severability clause for the Interactive Fantasy Sports Law, the new proposed legislation would redefine the scope of gambling under the New York Penal Law to exclude daily fantasy sports.

By amending the Penal Law definition of gambling, the new proposed legislation would play right into the Third Department’s holding. If the scope of “gambling” under the Constitution is governed by the Penal Law, as the Third Department held, changing the Penal Law, as the Legislature has the power to do, would fix the constitutional problem (assuming you think there is one—I don’t).

Thus, if the bill is passed and signed into law before the Court of Appeals decides the appeal, it would effectively moot the constitutional challenge because the Court would have to apply the law as it stood at the time of its decision. Now, the Court would still have to agree with the Third Department’s determination that the scope of “gambling” under the Constitution is the same as the Penal Law definition, but that seems likely, given that the Penal Law definition was adopted in the first instance to implement the constitutional ban after it was adopted.

This is a very interesting development, and could have a huge impact on the appeal before the Court of Appeals. It’s definitely something to watch.

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