The New York Daily Fantasy Sports Case - Part VI
June 17, 2016.
Goodell was clearly prepared.
No, this wasn’t Roger Goodell, the NFL Commissioner. This was his cousin, Andy Goodell. When the younger cousin, Roger Goodell, was given an internship with the NFL, Andy Goodell was a Chautauqua County executive. Roger Goodell would eventually become the NFL Commissioner and Andy Goodell would move to the New York Assembly.
Earlier that week, Vinny Testaverde and Jim Kelly had visited the Capitol to promote the daily fantasy sports bill. Now, three days later, the Assembly was having a vote. When it was Goodell’s turn to speak, he made sure that his views about the constitutionality were known.
ASSEMBLY MEMBER GOODELL: And would you agree with me that whether or not this constitutes gambling is an issue that ultimately will be decided by the courts and not the Legislature?
Great question. Assembly Member Pretlow, the sponsor of the New York DFS bill, responded:
ASSEMBLY MEMBER PRETLOW: Well, it depends if the court case that's pending right now does not go through then. There may be a lawsuit in the future, but by virtue of this piece of legislation we have in front of us right now deeming that this activity is not gambling, the court case would be moot.
This clearly wasn’t the answer Goodell was looking for, so he pressed on:
ASSEMBLY MEMBER GOODELL: But you would agree with me, right, that the Legislature does not have the power by statute to redefine the words in the Constitution in a way that the Constitutional framers or the public understood them at the time they were enacted.
ASSEMBLY MEMBER PRETLOW: I agree with you 100 percent that we cannot rewrite the Constitution by legislation. But as legislators, we are the creators of the law and we write the law and under that guise, we define what is legal and not legal and the legislative findings in this legislation are that this is not gambling, therefore, not subject to the provisions of the Constitution.
Ok … So the Constitution does not define gambling, but the Penal Law does. Could DFS be a game of skill, therefore not gambling? Goodell started probing.
ASSEMBLY MEMBER GOODELL: Now you indicate that this is more a game of skill rather than a game of chance.
ASSEMBLY MEMBER PRETLOW: Yes.
ASSEMBLY MEMBER GOODELL: And that's the basis for your belief it's not gambling?
ASSEMBLY MEMBER PRETLOW: Yes.
ASSEMBLY MEMBER GOODELL: You would agree with me —
ASSEMBLY MEMBER PRETLOW: Not total skill.
ASSEMBLY MEMBER GOODELL: I'm sorry? But isn't a number of activities that we all agree are gambling involve also a high degree of skill? I mean, certainly there's a high degree of skill involved in poker. I can assure you having just dabbled in it and lost my nickles or quarters or whatever, I mean, there's certainly a high degree of skill.
This was a rare misstep by Goodell. He was right that gambling sometimes involved skill, but poker was certainly not the correct example. We’ll explain why that is the case in Part X. In any event, Goodell quickly got back on track and used the proper example. He was getting ready to land the final blow.
ASSEMBLY MEMBER GOODELL: … [A]s the Chair of Racing and Wagering, of course, you know that horse racing involves a lot of skill for those who are in it professionally. I mean, they evaluate the horse, track conditions, temperatures, humidity, trends, jockeys, when it ran and they're all provided with a massive amount of data that they analyze provided by the tracks and others.
Assembly Member Goodell was simply following the game-of-skill argument to its logical conclusion. His argument was simple, yet fatal for the DFS industry: If skill and gambling can’t coexist, that would imply horse racing, an activity that is universally acknowledged as a form of gambling, would also be characterized as non-gambling. Much later, the New York State would also admit that betting on horses at racetracks is “indisputably a prohibited form of gambling.” (Appellants Brief, p. 10)
As the sponsor of the New York DFS bill, whose passage was crucial for the DFS industry, Assembly Member Pretlow could not and did not accept defeat. Instead, he walked right into the logical trap set by Assembly Member Goodell, and, incredulously, argued the impossible.
ASSEMBLY MEMBER PRETLOW: Well, I would agree with you, Mr. Goodell, but, you know, horse racing has been around since the 1800s and back then we didn't have the differentiation in laws between skill and chance. So when the Constitution of the State of New York was written, horse racing was included as gambling. If horse racing were to be invented today, it probably wouldn't fall under this gambling. (emphasis added)
ASSEMBLY MEMBER GOODELL: That's very interesting because, clearly, the Constitutional framers considered it gambling because they expressly excluded it from the scope of the Constitutional prohibition against gambling and they wouldn't have excluded it if they hadn't considered it gambling.
Assembly Member Goodell could have made the same argument for sports betting and Assembly Member Pretlow would have been forced to accept, because there is no other possibility, that sports betting is also not gambling under the New York Penal Law. He didn’t, but the Legislature, if acting rationally, could have easily made that inference.
Assembly Member Goodell ultimately voted no for the bill, stating:
I'm brought up short by that nagging Constitution because not only does it ban gambling, but in this situation, which is so unusual in the Constitution, it actually directs us, as a Legislature, to prohibit gambling.
Thus the Legislature not only heard that the game-of-skill argument leads to the blatantly implausible conclusion that horse racing would not be gambling, but they were also made aware that the DFS law creates a constitutional problem, the exact issue before the New York Court of Appeals.
Daniel Wallach, a sports gambling attorney who was active in this space, was asked on Twitter why he is anti-DFS. In his response, he said that he is not, but noted that the DFS bill in New York creates a constitutional problem.
Vinny Testaverde and Jim Kelly wowed the Capitol earlier that week. So did Goodell with his impeccable logic. The constitutional issues were properly raised.
What was the Legislature going to do?
When we found out, it wasn’t even close.
The DFS operators' bets paid off and so did their lobbying/celebrity efforts. Their hunch that a legislative victory is easier to get than a judicial victory proved to be correct.
The Legislature has chosen to ignore the impasse that the game-of-skill argument creates. The Legislature has also chosen to ignore the constitutional concerns raised. This actually has substantial implications since an important issue before the New York Court of Appeals is whether or not the Legislature acted rationally. Because if it did, then the Court may grant more deference to the Legislature.
But how could the Legislature have acted rationally when they ignored where the DFS game-of-skill argument takes them? It would have already been a stretch to conclude that the Legislature acted rationally had those discussions not been had. It is practically impossible to conclude that the Legislature acted rationally when the entire Legislature heard the game-of-skill argument leads to the impossible conclusion that betting on horses would not be gambling. Thanks to Andy Goodell, the Legislature was well aware of the constitutionality problem; but it simply chose to ignore it.
In our view, there really is no path to conclude that the Legislature acted rationally. They might as well have passed a law stating that roulette is also not gambling.
Shortly after, the Senate would also vote, 45-17 in favor of the DFS bill. This whole process was more one-sided than Super Bowl XXIV when the 49ers routed the Broncos 55-10. Governor Cuomo would eventually sign the daily fantasy sports bill into law on August 3, 2016.
Here is the funny thing about the constitutional issues; they have a way of popping back up. Exactly one year later after the New York Times ran the Haskell article, on October 5, 2016, four New York citizens sued the state, leaving the State of New York in the unfortunate position of defending a position that it viciously attacked a year ago. Five years later, October 5, 2021 is when we will hear the oral arguments in White v. Cuomo. (You can see the docket here once you search with APL number 2020-00027. Alternatively, Rob Rosborough keeps all the case materials here.)
Before coming back to that case, we have to address a few things.
First, that DFS is not a game is not just a cute, contrarian idea. It’s the only conclusion that logic dictates. DO NOT miss part VII tomorrow!
Second, what is the interplay of the New York Penal Law with other laws and what is the 1710 law that explains where the New York State Penal Law and other similar laws came from? Find out more in just a couple of days when we release part VIII.
Third, the whole New York saga showed the potential danger: any claim on future contingent events where skill matters can be disguised as a game, thus leading to a non-gambling determination. Given that fact, it is absolutely critical to distinguish games from claims, but how does one do that? What are some practical tools that can be used? Stay tuned as we detail that in a few short days with part IX.
Finally, what are two widespread confusions that muddy the waters and may confuse the courts? Again, follow along and we will expand on this in part X.
After these four posts, we will be in the final stretch. From there, we’ll go a bit less technical on legal stuff and finish up with visuals, analogies and some great history that provides much-needed context ...