Wellins v. Cuomo

• Decision Date: 26 October 2018
• Docket Number: 5861-16
• Citation: 87 N.Y.S.3d 805
• Parties: Jennifer WHITE, Katherine West, Charlotte Wellins and Anne Remington, Plaintiffs, v. Hon. Andrew CUOMO, as Governor of the State of New York, and the New York State Gaming Commission, Defendants.
• Court: New York Supreme Court

87 N.Y.S.3d 805

Jennifer WHITE, Katherine West, Charlotte Wellins and Anne Remington, Plaintiffs,

v.Hon. Andrew CUOMO, as Governor of the State of New York, and the New York State Gaming Commission, Defendants.

5861-16

Supreme Court, Albany County, New York.

Decided October 26, 2018

O'Connell and Aronowitz, (Cornelius D. Murray, Esq. of Counsel), 54 State Street, Albany, New York 12207, Attorneys for Plaintiffs

Hon. Barbara D. Underwood, New York State Attorney General, (Richard Lombardo, Asst. Attorney General, of Counsel), The Capitol, Albany, New York 12224-0341, Attorneys for Defendants

Gerald W. Connolly, J.

Plaintiffs, citizen-taxpayers of the State of New York who either have gambling disorders or are relatives of individuals who have such disorders, have brought the within action requesting a declaratory judgment that Chapter 237 of the Laws of 2016 of the State of New York, which authorizes interactive fantasy sports contests with monetary prizes (hereinafter "IFS"), is unconstitutional as in violation of the anti-gambling provision at Article 1, § 9 of the state constitution. Plaintiffs further request a permanent injunction enjoining the State and its agencies and officials from implementing such chapter. By Decision and Order of August 31, 2017, the Court denied the defendants' motion to dismiss the complaint. Subsequently, the parties agreed to waiver of discovery and a timetable for submission of motions for summary judgment. The parties have now fully submitted upon both the motion of plaintiffs and the cross-motion of the defendants.

Article 1, Section 9 of the State Constitution provides, in pertinent part:

1 ... except as hereinafter provided, no lottery or the sale of lottery tickets, pool-selling, book-making, or any other kind of gambling, except lotteries operated by the state and the sale of lottery tickets in connection therewith as may be authorized and prescribed by the legislature, the net proceeds of which shall be applied exclusively to or in aid or support of education in this state as the legislature may prescribe, except pari-mutuel betting on horse races as may be prescribed by the legislature and from which the state shall derive a reasonable revenue for the support of government, and except casino gambling at no more than seven facilities as authorized and prescribed by the legislature shall hereafter be authorized or allowed within this state; and the legislature shall pass appropriate laws to prevent offenses against any of the provisions of this section.

Chapter 237 states certain Legislative findings:

1. The legislature hereby finds and declares that: (a) Interactive fantasy sports are not games of chance because they consist of fantasy or simulation sports games or contests in which the fantasy or simulation sports teams are selected based upon the skill and knowledge of the participants and not based on the current membership of an actual team that is a member of an amateur or professional sports organization;

(b) Interactive fantasy sports contests are not wagers on future contingent events not under the contestants' control or influence because contestants have control over which players they choose and the outcome of each contest is not dependent upon the performance of any one player or any one actual team. The outcome of any fantasy sports contest does not correspond to the outcome of any one sporting event. Instead, the outcome depends on how the performances of participants' fantasy roster choices compare to the performance of others' roster choices.

2. Based on the findings in subdivision one of this section, the legislature declares that interactive fantasy sports do not constitute gambling in New York state as defined in article two hundred twenty-five of the penal law. (RPMWBL § 1400)¹ . In other pertinent part, Chapter 237 affirmatively states that "[i]nteractive fantasy sports contests registered and conducted pursuant to the provisions of this chapter are hereby authorized."

(RPMWBL § 1411).

Stipulated Facts

Upon the within submissions, the parties have stipulated and agreed to the following enumerated facts:

(1) Online interactive fantasy sports providers offer their subscribers season-long, weekly, and daily online interactive fantasy sports contests.

(2) Participants in such contests select fantasy teams of real-world athletes and compete against other contestants based on a scoring system that awards points based on the individual athlete's performances in actual sporting events that are held after contests are closed and no more participants may enter the contest. Participants in fantasy sports contests may use, among other things, their sports knowledge and statistical expertise to determine how athletes individually, and their fantasy teams overall, are likely to perform in such sporting events. Participants cannot control how the athletes on their fantasy sports teams will perform in such sporting events.

(3) The winnings paid to successful online interactive fantasy sports contestants come from the entry fees paid by all contestants. The online interactive fantasy sports providers derive their revenue by retaining a portion of such entry fees.

(4) On August 3, 2016, Governor Cuomo signed into law Chapter 237 of the Laws of 2016, which amends the Racing, Pari-Mutuel Wagering and Breeding Law (hereinafter, "RPMWBL") by adding a new Article 14.

(5) Chapter 237 of the Laws of 2016 authorizes interactive fantasy sports contests that are registered and conducted pursuant to the law (RPMWBL § 1411) and prohibits unregistered interactive fantasy sports contests (RPMWBL § 1412).

(6) Chapter 237 of the Laws of 2016 defines an "interactive fantasy sports contest" as "a game of skill wherein one or more contestants compete against each other by using their knowledge and understanding of athletic events and athletes to select and manage rosters of simulated players whose performance directly corresponds with the actual performance of human competitors on sports teams and in sports events." (RPMWBL § 1401(8) ).

(7) Chapter 237 of the Laws of 2016 provides for the registration of interactive fantasy sports providers (RPMWBL § 1402), required safeguards and minimum standards as a condition of such registration (RPMWBL § 1404), annual reporting by registered interactive fantasy sports providers (RPMWBL § 1406), taxation of registered interactive fantasy sports providers (RPMWBL § 1407), and the assessment of regulatory costs upon registered interactive fantasy sports providers (RPMWBL § 1408).

(8) The total tax revenue that the State of New York received in 2016 from the operation of interactive fantasy sports conducted pursuant to Chapter 237 of the Laws of 2016 was $2,338,607.00.

(9) To become registered, the interactive fantasy sports provider must implement measures that "ensure all winning outcomes reflect the relative knowledge and skill of the authorized players and shall be determined predominantly by accumulated statistical results of the performance of individuals in sports events." (RPMWBL § 1404(1)(o) ).

(10) Chapter 237 of the Laws of 2016 requires registered interactive fantasy sports providers to design games requiring the identification of highly experienced players and limiting the number of entries a contestant may submit for any single contest. (RPMWBL § 1404(1)(g) and (2) ).

(11) Chapter 237 of the Laws of 2016 requires registered interactive fantasy sports providers to enable contestants to "self-exclude" themselves from contests and provide information regarding assistance for compulsive players. (RPMWBL § 1404(1)(d) and (m) ).

Plaintiffs' Contentions

Plaintiffs argue that the plain meaning of the term "gambling" in the Constitution includes IFS and that the existence of a material degree of skill in IFS competition does not exclude IFS from the definition of gambling, as such competitions indisputably contemplate a material degree of chance. Plaintiffs reference the IFS scoring system, wherein points are awarded based upon contingent future events (performances of the selected "fantasy" players).

Plaintiffs assert that the legislative mandate in the constitutional provision is solely to pass laws to prevent gambling offenses and not to carve out exceptions to the provision. Plaintiffs argue that if the Legislature had the right to arbitrarily define gambling [via statute], the Constitutional prohibition would be a nullity. Plaintiffs assert that all prior exceptions to such prohibition, including for pari-mutuel wagering on horse racing, certain lotteries and casinos, have been authorized solely by constitutional amendment.

Plaintiffs point to anti-gambling laws, specifically now-superceded Penal Law § 351 passed shortly after the 1894 amendment expanding the scope of the constitutional prohibition, which specifically criminalized bets, wagers and pools on the results of contests of skill, speed, power or endurance, as evidence of the use and meaning of the word "gambling" in the constitutional provision. Plaintiffs argue that such an contemporaneous interpretation by the Legislature of a Constitutional provision is entitled to great deference, citing to, inter alia, New York Public Interest Research Group v. Steingut , 40 N.Y.2d 250, 258, 386 N.Y.S.2d 646, 353 N.E.2d 558 (1976) (hereinafter Steingut ). Plaintiffs argue that the Legislature cannot now, by legislation, define "gambling" to the contrary of its common and ordinary meaning.

Plaintiffs also argue that Chapter 237 of the Laws of 2016, by its terms, appears to accept that IFS is gambling, as it requires operators to both enable contestants to exclude themselves from contests and to prominently list information on their websites concerning assistance for compulsive play. Plaintiffs note that § 225.00 of the Penal Law defines, for criminal prosecution purposes, a "contest of chance" as one that depends, to a "material degree", upon an "element of chance", and defines "gambling" as occurring when a person ...