White v. Cuomo
| Decision Date | 22 March 2022 |
| Docket Number | 12 |
| Citation | 38 N.Y.3d 209,192 N.E.3d 300,172 N.Y.S.3d 373 |
| Parties | Jennifer WHITE, et al., Respondents, v. Andrew CUOMO, as Governor of the State of New York, et al., Appellants. |
| Court | New York Court of Appeals Court of Appeals |
Letitia James, Attorney General, Albany (Victor Paladino, Barbara D. Underwood and Steven C. Wu of counsel), for appellants.
Gibson, Dunn & Crutcher LLP, New York City (Matthew L. Biben and Mylan L. Denerstein of counsel) and Dallas, Texas (Allyson N. Ho of the Texas bar, admitted pro hac vice, of counsel), for FanDuel, Inc. and another, amici curiae.
Parlatore Law Group, New York City (Scott D. Brenner of counsel), for The New Sports Economy Institute, amicus curiae.
Article I, § 9 of the New York Constitution authorizes "gambling" in certain circumstances and prohibits it in others. In 2016, after careful consideration, the New York State Legislature enacted article 14 of the Racing, Pari–Mutuel Wagering and Breeding Law authorizing and regulating interactive fantasy sport (IFS) contests upon determining that IFS contests are not prohibited gambling activities because contestants use significant skill to select their rosters, creating fantasy teams, and therefore have influence over the outcome of the fantasy contests between IFS participants. Today, we clarify that the historic prohibition on "gambling" in article I, § 9 does not encompass skill-based competitions in which participants who exercise substantial influence over the outcome of the contest are awarded predetermined fixed prizes by a neutral operator. Because ample support exists for the legislature's determination that the IFS contests authorized in article 14 are properly characterized as lawful skill-based competitions for prizes under our precedent, plaintiffs have not met their burden to demonstrate beyond a reasonable doubt that article 14 is unconstitutional.
IFS contests have been a popular form of entertainment for over 40 years and the pastime is played by millions of New Yorkers. Participants of IFS contests create virtual "teams," drawing from their knowledge of the sport and athlete performance to draft rosters comprised of simulated players based on professional athletes. These virtual teams—composed of athletes who play for different real-life teams—compete against virtual teams compiled by other IFS contestants. The performance of simulated players on an IFS roster corresponds to the performance of the real-life athletes—that is, participants of IFS contests earn fantasy points based on how their selected athletes perform specific acts in actual sporting events that occur after the IFS contest has closed. However, the outcome of an IFS contest does not mirror the success or failure of any real-life athlete or sports team. This is because IFS rosters do not replicate real-life teams, IFS scoring systems are premised on an aggregation of statistics concerning each individual athlete's performance on specific tasks, and IFS contests pit the rosters of participants against one another rather than tying success to the outcome of sporting events. IFS contestants pay entry fees to participate, and the pre-set prizes paid to the most successful participants—along with operator revenues—are typically drawn from those entry fees.
Traditionally, IFS contests spanned the duration of a sporting season and, throughout the season, participants could "manage" their team by trading players, picking up free agents, and adjusting their lineups. In more recent years, operators began also offering weekly and daily IFS contests generally structured in the same manner, with IFS contestants assembling virtual teams of players drawn from multiple real-life teams within the confines of an assigned salary cap. Success in weekly or daily IFS contests, as with season-long competitions, does not depend on the performance of a single athlete or team. Notably, many professional sport leagues support fantasy sports, viewing the virtual games as a way to engage fans and partnering with IFS operators to promote the competitions.
In 2015, the Attorney General commenced actions against two IFS operators, seeking to enjoin daily IFS contests as "unlawful gambling" in violation of the Penal Law and State Constitution. This litigation—which was eventually discontinued with regard to the allegations of illegal gambling—prompted the New York State Legislature to review the legality of IFS contests. At a public hearing, legislators considered testimony from stakeholder representatives including, among others, the Fantasy Sports Trade Association, fantasy sports operators, horse-racing associations, and organizations opposed to the proliferation of gambling. Following "extensive research into the operations of fantasy sports," the Racing and Wagering Committee concluded that "fantasy sports is not gambling and does not, therefore, violate ... the New York State Constitution" (N.Y. Assembly Debate on Assembly Bill A10736 [June 17, 2016] at 145).
After robust debate, the legislature enacted article 14 of the Racing, Pari–Mutuel Wagering and Breeding Law (see L 2016, ch 237), authorizing registered prize-based IFS contests conducted in accordance with various restrictions and subject to regulatory oversight (see Racing, Pari–Mutuel Wagering and Breeding Law §§ 1402, 1405 1411, 1412 ). The legislature declared that IFS contests are not "gambling" within the meaning of the Penal Law (see Penal Law § 225.00[1], [2] )1 because the outcomes of such contests are dependent upon "the skill and knowledge of the participants," rather than chance, and the "contests are not wagers on future contingent events not under the contestants’ control or influence" because the outcome is dependent upon the comparative skill of each IFS participant as measured against one another ( Racing, Pari–Mutuel Wagering and Breeding Law § 1400[1][a], [b] ; [2]; see § 1401[8]).
Soon after the legislature enacted article 14 of the Racing, Pari–Mutuel Wagering and Breeding Law, plaintiffs commenced this action against defendants, then-governor Andrew Cuomo and the New York State Gaming Commission, seeking a permanent injunction precluding implementation of article 14 and a declaration of constitutional invalidity. After defendants answered, denying plaintiffs’ allegation that the IFS contests authorized by article 14 constitute prohibited gambling, the parties eventually stipulated to certain facts regarding IFS contests and cross-moved for summary judgment.
Supreme Court granted plaintiffs’ motion for summary judgment in part, declaring that article 14 violates the constitutional prohibition on "gambling" to the extent it authorizes IFS contests, and also granted defendants’ cross motion for summary judgment in part—thereby declaring article 14 valid to the extent it excludes IFS from the scope of the criminal statutes relating to gambling ( 62 Misc.3d 877, 87 N.Y.S.3d 805 [Sup. Ct., Albany County 2018] ). Applying the Penal Law definitions of "gambling" and "contest[s] of chance" ( Penal Law § 225.00[1], [2] ), the court reasoned that IFS contests are "gambling" under the State Constitution because they "involve[ ], to a material degree, an element of chance" inasmuch as the performance of real-life athletes is not subject to the IFS contestants’ control (62 Misc.3d at 887, 87 N.Y.S.3d 805 ). However, the court determined that the legislature acted within constitutional bounds to exclude IFS contests from the scope of the Penal Law provisions regarding gambling because, while the legislature lacked authority to authorize "gambling" prohibited by the Constitution, it "has the full authority to define and limit such offenses in the context of [a criminal] anti-gambling statute" ( id. at 897–898, 87 N.Y.S.3d 805 ).
Upon the parties’ cross appeals, the Appellate Division modified and, as so modified, affirmed ( 181 A.D.3d 76, 118 N.Y.S.3d 775 [3d Dept. 2020] ). Also applying the Penal Law definition of "gambling," the Appellate Division agreed with Supreme Court that IFS contests are "gambling" prohibited by the Constitution on the rationale that IFS participants do not control the performance of the athletes on their rosters and, thus, the contests involve "a material degree of chance" ( id. at 82–84, 118 N.Y.S.3d 775 ). The Appellate Division further invalidated that portion of article 14 that excludes IFS from the scope of the criminal "gambling" provisions, asserting that—although constitutional—the legislature "would not have wished to preserve the decriminalization of IFS" in light of the court's invalidation of the majority of article 14 ( id. at 86, 118 N.Y.S.3d 775 ). However, the Appellate Division upheld the provision prohibiting unregistered IFS contests (see Racing, Pari–Mutuel Wagering and Breeding Law § 1412 ) since no IFS contests could lawfully be registered following its decision (see 181 A.D.3d at 84, 118 N.Y.S.3d 775 ). A single Justice dissented, concluding that the record supported the legislature's determination that IFS outcomes do not depend to a material degree on chance or future contingent events not under the contestants’ control and, as such, "the lawmakers properly determined that an IFS contest is not a constitutionally prohibited gambling activity" ( id. at 87, 118 N.Y.S.3d 775 ).
Defendants appealed to this Court as a matter of right on constitutional grounds (see CPLR 5601[b][1] ), and we now reverse.
The question before us is whether the legislature violated article I, § 9 of the New York Constitution when it enacted article 14 of the Racing, Pari–Mutuel Wagering and Breeding Law, authorizing certain IFS contests in New York. It is well settled that "[l]egislative enactments are entitled to ‘a strong presumption of constitutionality’ " ( Dalton v. Pataki, 5 N.Y.3d 243, 255, 802 N.Y.S.2d 72, 835 N.E.2d 1180 [2005], quoting ...
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