The New York Daily Fantasy Sports Case - Part VII
A (Visual) Impossibility Story
What we covered in Part VI was how Andy Goodell wonderfully exposed the fatal hole in DFS. His argument consisted of three simple points:
You are saying DFS is a game of skill and therefore not gambling.
Betting on horses also involves skill, therefore, using the same logic, betting on horses wouldn’t be gambling, either.
We know that is not true, i.e. betting on horses is gambling, so skill and gambling can coexist after all. Therefore, your argument that DFS involves skill does not mean DFS cannot be gambling.
That’s it. That argument played out in front of the entire New York Assembly, but the majority, inexplicably, voted in favor of the DFS bill, 91-22. In our view, there is no way that the Legislature’s actions can be remotely rational given they were exposed to Goodell’s impeccable logic.
In fact, why stop with horses? The same logic can be applied to sports betting. With the Supreme Court striking PASPA off the books in Murphy v. NCAA, here is a hypothetical conversation that may be happening between a sports law attorney and a client:
CLIENT: We are considering setting up a sportsbook in our state.
ATTORNEY: We’d advise against this.
ATTORNEY: As you know, the Supreme Court did not legalize sports betting. It just removed a federal prohibition off the books. States took this to mean that they can now make those decisions by themselves. Your state has not yet legalized sports betting.
CLIENT: Why is that even relevant? We believe sports betting involves skill.
ATTORNEY: I don’t disagree.
CLIENT: It’s a game of skill.
ATTORNEY: Well … I’m not sure about that, but it’s still gambling.
CLIENT: I’m confused. As you know we also offer daily fantasy sports, and you told us that you think DFS is a game of skill, therefore DFS is not gambling.
ATTORNEY: Sports betting is different.
CLIENT: Why? Are you saying that some games of skill are gambling and others are not? You told us once skill predominates, a game would not be gambling in our state. I understand that we’d still need to prevail on the argument that skill predominates in sports betting, but if we can successfully argue that, for sure it’s not gambling. I don’t understand why daily fantasy sports is not gambling if it involves skill, but sports betting is. What is the difference?
ATTORNEY: Uh … (Long pause). You have a point. Let me get back to you on that.
There are two parts to this:
i) the starting argument: sports betting is a game of skill; and
ii) the bridging argument: If DFS is a “game of skill,” and therefore not gambling, neither is sports betting.
Hypothetical? The exchange above is. We made that up. The starting argument and the bridging argument? Not at all. There is quite a robust record for both of these arguments.
Starting Argument - Sports Betting Is A Game of Skill
That sports betting is a game of skill has been argued by many already. Here is Ted Leonsis, the owner of the Washington Capitals, Washington Wizards and other sports properties:
Here is Dan Wallach, the sports gambling attorney:
Here is Dustin Gouker, a sports gambling reporter, suggesting that sports betting is a game of skill, attributing it, incorrectly, to the West Virginia Attorney General:
Intentional or not, this is a mischaracterization! The West Virginia Attorney General never said sports betting is a game of skill. To make sure, we double-checked not only the 2016 DFS opinion (PDF), but also the 1991 opinion (PDF) on sports betting.
Both of these opinions did say sports betting involves skill. So what? Involving skill is not the same thing as being a game of skill; that is exactly the point.
Remember, skill and gambling can coexist. Game-of-skill and gambling, on the other hand, cannot.
Bridging Argument - If DFS Is A “Game of Skill,” And Therefore Not Gambling, Neither Is Sports Betting.
Seem farfetched? You would be surprised. In fact, this very argument was made in front of New York State lawmakers on January 24, 2018.
Do you buy it? We don’t. Actually, not many people do.
Rob Rosborough was a former senior court attorney at the New York Court of Appeals and follows the DFS case very closely. He wrote a paper (published PDF) on it and said:
In addition to opposing the attorney general’s lawsuit, Draft Kings, FanDuel, and the entire DFS industry undertook a substantial lobbying effort to legalize DFS in New York. Instead of pushing for a constitutional amendment to create an exception for DFS from the ban on “gambling,” like the legislature has done before for the state lottery, horseracing, and most recently to allow casinos, however, the industry decided to try a shorter path. In New York, a constitutional amendment is, at minimum, a two-plus-year process. The proposed amendment must be passed in two successive legislative sessions and then approved at a referendum by the people of the state at a general election. The DFS industry didn’t want to wait that long. So, the industry pushed for a one-off bill instead. (internal footnotes omitted)
Legal Sports Report, an industry publication, described it more bluntly:
A constitutional amendment to authorize sports wagering … [is] ... a lengthy process to be sure and one fraught with political pitfalls … The state could try to call sports betting “a game of skill,” so it can skirt the constitutional amendment requirement. That’s the tactic used to enact a daily fantasy sports law in 2016. (emphases added).
Dustin Gouker used to write a lot for Legal Sports Report. Even though he himself suggested sports betting is a game of skill (see above), he wasn’t buying it:
Sure, there’s an argument that sports betting is also a game of skill, but c’mon.
Steve Ruddock is Editor In Chief at Gaming Law Review and Analyst and Content Director at BettingUSA.com. He saw right through it:
In sum …
The statement that DFS is a game of skill therefore not gambling implies that betting on horses can be characterized as a game of skill and would therefore not be gambling, the impossibility that was wonderfully exposed by Andy Goodell.
The statement that DFS is a game of skill therefore not gambling also implies that sports betting can be characterized as a game of skill and would therefore not be gambling. Clearly, that can’t be true.
If the argument doesn’t work for betting on horses and if it doesn’t work for betting on sports, why would it work for DFS? It doesn’t. The argument that DFS is a game of skill and not gambling is a dead end.
We are a visual bunch, so let us also tell the story that way.
Prior to DFS, it was pretty well established that the state of the world was as follows. There wasn’t a genuine disagreement about any of this:
Then DFS came along. The legal question was: where would it fit? The game-of-skill camp put it over to the left, right next to chess:
But then Andy Goodell came out and basically said, wait a second, that doesn’t make any sense. If DFS goes over there, then we should slide horse racing over there as well. He made that argument in front of the entire New York Legislature, which was supposed to be acting rationally.
Of course, by that logic, sports betting would move over as well. Why not? If DFS can be a game of skill, anything can be a game of skill.
That little intersection of ‘game’ and ‘skill’ now looks pretty busy, right?
If you believe the DFS industry, that’s what our world has now become. But this simply can’t be. Basically, this argument eradicates large chunks of gambling out of existence. This is a dead-end.
Can DFS be a game of skill and gambling? At least one fantasy sports operator described itself this way according to Dueling with Kings: High Stakes, Killer Sharks, and the Get-Rich Promise of Daily Fantasy Sports, p. 78):
Mondogoal, as a primarily United Kingdom–facing product, cheerily describes itself as “skill-based gambling.”
Ultimately though, nothing illustrates this better than the Dustin Gouker/Dan Roberts exchange. The following was the key part:
ROBERTS: Yeah I like that term that you are using: skill-based gambling. I always thought it was strange that there has to be a distinction of … it’s either. Oh it’s a game of skill, or it is gambling. I mean…Why can’t it be both? (emphasis added)
GOUKER: It doesn’t have to be.
GOUKER: It's only because of the legality, and we have seen, the existing laws that the states say, say certain things are skill-based gaming, certain things are gambling.
We’ll talk more about this exchange in Part X, but for now, suffice it to say that the concept of skill-based gambling makes … zero sense when it comes to games. Gouker is trying to rationalize his position by downplaying the legality, as if that’s a minor detail that doesn’t matter. Well … once the prize and consideration prongs of the test are met, that literally is the only thing that matters. The determination of gambling is ultimately a legal conclusion. What else could it be?
Basically, this camp (DFS is a game of skill and gambling) views the world as follows:
Again, skill and gambling can coexist (see the first picture above). Game-of-Skill and gambling, on the other hand, cannot. In other words, that middle area where game, skill and gambling all intersect, is an empty set. There’s nothing in there under standard principles of gaming law. Visually, this is how it looks:
Another dead end.
Let’s recap what we have done so far. We have started with the premise that DFS is a game of skill. If DFS is a game of skill then it is either:
i) a game of skill, and therefore not gambling (the DFS industry position); or,
ii) a game of skill, but still gambling. (the Gouker/Roberts camp).
We have then followed each path to its natural conclusion and showed that the first path is a dead-end, because it would imply both horse betting and sports betting would stop being characterized as gambling. Similarly, we showed that the second path is also a dead end, because it is a clear violation of standard gaming law principles.
Basically, we split the universe into two mutually exclusive and exhaustive possibilities and showed that neither path works. That must mean we are not in the right universe to begin with, i.e. DFS is not a game of skill to begin with. The graphic below illustrates our progress so far:
Could DFS then be a game of chance?
If DFS cannot be a game of skill, only two possibilities remain, i) either DFS is a game of chance, or ii) DFS is a claim on future contingent events. Either way, DFS is gambling, thus, the Court of Appeal’s inquiry should effectively end here.
To be sure, all three New York courts that pondered this question, namely the Supreme Court when the State sued the DFS operators and asked for an injunction, then the Supreme Court again in White v. Cuomo, and the Appellate Court in White v. Cuomo argued that DFS is a game of chance as that term is defined under the Penal Law.
Still, something doesn’t feel quite right about that one, does it? It doesn’t really neatly reconcile to the quantitative evidence we have. What about that McKinsey article, one might ask? What about the statistical studies? What about expert opinions? All of these things are, unsurprisingly, widely cited in briefs; first by the DFS operators and then the State of New York.
Given that body of evidence, we don’t think DFS is a game of chance, either. Let’s take stock of where we are, visually:
Well … At the expense of repeating ourselves, here is our point. The argument that skill and gambling cannot coexist only applies to games. Once it is understood that DFS is not a game, then all those skill findings can easily and happily coexist with the conclusion that DFS is gambling. That’s because once we are not dealing with games anymore, skill and gambling could happily coexist.
So … if DFS is not a game of skill or a game of chance, there can only be one possibility: DFS is not a game in the first place.
We have been completely blind to the threshold question of whether or not DFS is a game. Asking that question is absolutely critical for the Penal Law to operate properly.
The last picture above describes the world as a referendum between game-of-skill and game-of-chance. That is the lens of the DFS industry. Their very existence is predicated on them convincing everybody else that DFS is a game.
However, we now know that picture is incomplete. This is what the world really looks like:
Or, as an alternative, let’s go back to our Venn diagrams. This is what the world really looks like:
Dear reader - you were fed the blue pill. You were inside the DFS Matrix! We are honored to offer you the red pill.
Remember what was said in the movie The Matrix:
This is your last chance. After this, there is no turning back. You take the blue pill—the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill—you stay in Wonderland, and I show you how deep the rabbit hole goes. Remember: all I'm offering is the truth. Nothing more.
We can all continue to believe that DFS is a game despite all evidence to the contrary. Or, we can decide to follow the truth and see where it takes us. Which one will it be?
That’s really it. That DFS is not a game is not a cute contrarian opinion. It is literally the only conclusion that logic dictates.
When you have eliminated all which is impossible, then whatever remains, however improbable, must be the truth.