The New York Daily Fantasy Sports Case - Part IV
Losing the Battle But Winning the War
November 25, 2015.
Time for oral arguments … You can find the transcript here.
There were two things that the state did that were really important. First, the “future contingent event” argument was the State’s leading argument. They said:
I would like to focus, your Honor, on this standard now. So what is the future contingent event out of the control or influence of the bettor? For daily fantasy sports, it is the performance of athletes in real world games which no daily fantasy sports bettor can control.
Exactly. The State continued:
In the words of FanDuel, the outcome of the game is, quote, "contingent on the positive performance of all of their players," unquote, in the real sports events. In fact, if the athletes do not perform or the games are not held, there can be no daily fantasy sports winner or loser. The winner of each daily fantasy sports contest is dependent on what happens in the real games and no one can foresee what will happen in any of those real games.
Here the State did something very clever. They were not only arguing the future contingent event piece, but they were attributing that statement to FanDuel directly, latching on to a previous statement made. With that, and a few other words, it was time to go for the finish:
Your Honor can stop right there. The State has demonstrated all three elements, and, thus, has a likelihood of success on the merits.
Indeed, that was it. Whether DFS involves skill wasn’t even discussed yet, and there was no need to. It was a moot point.
There was only one thing left to do - to clarify the position on traditional fantasy sports. Not surprisingly, DraftKings was taking issue with the State’s position:
And, your Honor, this is the pivotal point. If traditional sports fantasy gaming meets this test, that prong of the statute, daily sports fantasy games do. They say traditional fantasy sports games aren't betting. They say they're games that pass statutory muster. So, too, must daily sports fantasy games.
DraftKings was correct on this point. The State had to do a few things. First, they needed to clarify that some, but not all, traditional fantasy sports was gambling. They said:
Traditional fantasy leagues are typically games among friends or coworkers and are about bragging rights and side wagers. The difference is there is no wager being controlled and operated and fronted by the management of that daily or traditionally fantasy sports enterprise. There is no wager that is happening within the four square corners of the event that is happening, whether it is through papers, whether it is through a website, no wager is happening through the website.
Done. Then, the state had to concede that they had not taken action on traditional fantasy sports even when it was gambling:
If a site were to offer season-long bets, maybe it would be something different. But, in the Attorney General's position, traditional fantasy sports is a different animal. If a site were to offer season-long bets, take a cut of the bets and offer cash prizes for winners, we, the State, would consider whether it was a gambling operation worthy of an enforcement action. Not saying we wouldn't, that is not an issue here today. What is at issue here today is what the daily fantasy sports operators are doing, and that falls clearly and really simply within the four corners of 225.
Done. Traditional fantasy sports, when it was gambling, was not worthy of enforcement action. Finally, that thing about the State of New York having waited too long …
With respect to what the Defendant is saying isn't their laches or estoppel argument, a few more words. The Defendants want an allowance because they have been operating for a period of time. This sounds a lot like estoppel. Laches and estoppel do not apply to enforcement actions and with good reason, because every person or entity engaged in a legal or improper activity could use the duration of their criminal enterprise as a defense. And we cite cases regarding this in our brief. (emphasis added).
Done, done, and done.
Just one day before Thanksgiving, it seemed like the turkeys were not the only ones being cooked. Things were really not looking up for DFS.
December 3, 2015.
Somewhat surprisingly, the initial commentary by many lawyers did not touch on the ‘future contingent event’ language at all. Even the New York Attorney General himself didn’t really elaborate on it in his original cease-and-desist letter, perhaps as a matter of strategy. In addition, the term ‘future contingent event’ did not appear when DraftKings and FanDuel responded with lawsuits of their own, not even once.
But with the oral arguments just before Thanksgiving, we were beginning to see a shift in focus. As we covered in Part II, the future contingent event argument was now officially the State’s leading argument. Our amicus brief (PDF) explains why. DFS is not, and has never been a game. It is a claim on future contingent events, namely athlete performances; skill is entirely irrelevant.
In any event, the legal thinking was catching up to our position. Daniel Wallach published an article on Legal Sports Report and basically said what we said in our piece that was turned down by Legal Sports Report just 10 days ago. The title of his article: New York Daily Fantasy Sports Court Case May Hinge on Meaning Of ‘Future Contingent Event’.
December 11, 2015.
Decision time for the Supreme Court of the State of New York …
Judge Mendez issued his opinion (PDF) and ordered an injunction. Barely two months have passed since the New York Times ran its bombshell article about the Haskell scandal, and DFS appeared to be packing up. Somehow, the DFS industry managed to secure a stay, however, so they were still in business while the case was being appealed. A showdown was coming, or so we thought.
It may not have been obvious at the time but there was one silver lining in the opinion for DFS. Despite the future contingent event argument being the State’s lead argument just a couple of weeks ago, that critical phrase was mentioned only once in the opinion, and that was when the Penal Law was presented. Whether it was the people protesting in front of Schneiderman’s office a month ago or the industry relentlessly advancing the game-of-skill narrative, the DFS industry appeared to have turned this whole debate into a false referendum between the game-of-skill and game-of-chance arguments. That, ultimately, is why White v. Cuomo happened in the first place.
Give credit to the DFS industry for tricking everybody into thinking DFS is a game. The result? We have been applying the wrong test to DFS all along. Everybody was taking the blue pill.
We all have to snap out of the illusion that DFS is a game in order to apply the laws properly.