The New York attorney general issued a cease and desist order to a number of daily fantasy sports (DFS) operators alleging that DFS constitutes illegal gambling under NY state law. According to the AG’s interpretation, DFS operations constitute illegal gambling under New York law, according to which, “a person engages in gambling when he stakes or risks something of value upon the outcome of a contest of chance or a future contingent event not under his control or influence,” because players are placing bets on events outside of their control or influence, specifically on the real-game performance of professional athletes.

Arguably, however, the “contest” is not a bet on the real-world performance of an athlete. Instead, the contest could be viewed as being based on the ability for a player to pick a collection of athletes whose collective performances will earn more fantasy sports points than other players’ picks. Traditionally, in skilled-based contests, a player competes against other players to exercise more skill.

On a somewhat positive note for traditional fantasy sports, the NY AG noted:

We believe there is a critical distinction between DFS and traditional fantasy sports, which, since their rise to popularity in the 1980s, have been enjoyed and legally played by millions of New York residents. Typically, participants in traditional fantasy sports conduct a competitive draft, compete over the course of a long season, and repeatedly adjust their teams. They play for bragging rights or side wagers, and the Internet sites that host traditional fantasy sports receive most of their revenue from administrative fees and advertising, rather than profiting principally from gambling. For those reasons among others, the legality of traditional fantasy sports has never been seriously questioned in New York.

New York is the most recent state to weigh in on with a view on the legality of fantasy sports. Given the meteoric rise and success of DFS, it has drawn increased regulatory scrutiny. As noted in some of our prior blog posts, at least some states are pursuing legislative changes to expressly permit certain forms of DFS.