The New York Daily Fantasy Sports Case - Part V

A Missed Opportunity

March 21, 2016.

That DFS was a claim on future contingent events was obvious to us but we still wanted to get the idea out there. We had made a connection with Dan Wallach at that point, so we asked him whether he could help us find a law firm that could put the finishing touches on our brief. That didn’t end up leading to anybody, but we were separately reaching out to various firms and eventually, FisherBroyles signed up. We got to work and produced this amicus brief for the Appellate Division in New York.

The terminology we used in that brief was a little bit different from what we use now: we called DFS a market in that brief, not a claim. That said, its key contribution was observing that DFS is not a game, the same argument we made in our latest brief in White v. Cuomo (oral arguments scheduled for October 5, 2021 in the New York Court of Appeals); we felt our brief was offering fresh insights. Dan Wallach kindly reviewed it, and called the analysis ‘fantastic.’ We hoped, and certainly believed that our brief would make a difference.

It didn’t … not because the Court did not agree with it, but rather because the Court never had an opportunity to even consider it.

Eric Schneiderman was correct on the merits, and we have always felt that he would have won the case had he pursued litigation to the very end. We will never know because he decided to settle with DraftKings and FanDuel. Under the terms of the settlement, FanDuel and DraftKing would suspend operations in New York, but if daily fantasy sports were to be legalized in New York before June 30, 2016 the gambling claims against the companies would be dropped. Essentially, the DFS industry was betting that their chances of getting a legislative victory was better than a judicial one. On that issue, they would be proven right … 

Bradley Tusk is best known for his role in helping Uber with regulation (and wisely getting Uber stock in return). Here is a profile on him; here’s another. He has also written a book called The Fixer: My Adventures Saving Startups from Death by Politics. While perhaps not as well-known as his Uber gig, Tusk played an important role for the DFS industry, too. For the most part, his involvement started, you guessed it, on October 5, 2015 … 

The Times story flashed across my phone. So did an opportunity. I quickly wrote the following note, unsolicited, to Christian, figuring that either maybe he would now be interested in working with us, or at least we’d provide some useful advice that could win us some goodwill for the future. 

Christian Genetski was FanDuel’s in-house counsel. In his book, Tusk explains how he had met Genetski a few months before, but the urgency wasn’t there. That had clearly changed. Tusk and his team got the FanDuel account that very evening. 

Tusk presented the issue as old guard vs. new guard. 

We jumped into action. Traditional lobbying was important since the casinos (the real opponents hiding behind left- and right-wing groups and newspapers) were masters at the inside game. While each casino likes to loudly argue for the public’s right to spend their money however they see fit, that only really applies when they want permission to do something new like add more blackjack tables or slot machines. The rest of the time, they sue their lobbyists and campaign donations to quietly try to kill any expansion of gaming that doesn’t directly benefit them. But countering them in the halls of each statehouse was only how we’d avoid extinction, not how we’d win. (emphasis added) 

While Tusk is probably right about the hypocrisy of the casinos in general, the casinos were actually right on the merits on this one, even though they probably did not realize why that was the case. What Tusk had missed, and this is central to the case, is that DFS was not a gaming expansion, it was a gambling expansion. DFS could have not been a gaming expansion, because DFS is not a game. 

That subtle but critical insight existed only in our amicus brief and the only way our amicus brief would come into play was if the Court considered it. The only way for the Court to have considered it was if Schneiderman did not wash his hands off the case by settling and punting it to the Legislature.

Note to future regulators, attorney generals and other enforcers of law: if you truly want to set the right incentives for society, please let the disputes mature into full resolution; let the decision be made on the merits. That single settlement action is arguably what changed the trajectory of DFS and why we have widespread sports gambling in America today, in potential violation of the state laws, the Wire Act and other relevant laws.

Tusk’s strategy worked. 

We ended up working on campaigns in more than thirty states, passing legislation in fifteen of them by the end of the 2017 legislative season. Some campaigns required a multifaceted attack including TV ads, lobbying, grassroots, polling, earned media, social media, and bringing in celebrities to wow lawmakers and help push our bill over the top (Tony Romo in Texas, Vinny Testaverde and Jim Kelly in New York). (emphasis added)

If you are a hardcore football fan, these guys need no introduction. In case you are not, here is a quick glimpse. 

Vinny Testaverde won the Heisman Trophy in 1986. He would end up having a great career. He would take the Jets to the AFC Championship game in 1998 where they would lose to the eventual champion, the Denver Broncos. He delivered one of the best comebacks in the NFL, which was arguably the best Monday Night Football game ever played. He was inducted into the College Hall of Fame in 2013.

As for Jim Kelly … Remember this?

This missed field goal led to Kelly’s Bills losing Super Bowl XXV. Kelly would take them back to the Super Bowl again in 1992. Then again in 1993. Once again in 1994. Unfortunately, the Bills would lose them all, though some believed that there was no shame in going to the Super Bowl four times in a row. The story eventually became an ESPN 30 for 30 documentary with the title Four Falls of Buffalo. Kelly was inducted into the Pro Football Hall of Fame in 2002.

Both of these guys are true legends. Years later, they would be listed as lobbyists for an entity called Sports Legends Group, LLC and would take home an undisclosed portion of $100,000 to visit the Capitol and generate some buzz around the daily fantasy sports bill. 

There is nothing wrong with a sports legend trying to monetize their popularity, but it does need to be acknowledged that while the New York Court of Appeals evaluates whether the Legislature acted rationally in passing the daily fantasy sports bill, that just a few days prior, these two Hall of Famers were at the Capitol; lawmakers and staff members lined up to take photos with them because somebody, somewhere made it their goal to wow lawmakers

It must have worked because a mere 72 hours after Testaverde and Kelly showed up at the Capitol, a man who has even better name recognition than them would wow the Capitol with his impeccable logic. Inexplicably, it would end up not making a difference …

Start at the beginning with Part I

Continue to Part VI