Fantasy sports nightmare in N.Y. as games are ruled illegal gambling

For proponents of sports betting and fantasy sports, a court ruling Thursday in New York is a nightmare.

A New York appellate court ruled that fantasy sports contests -- such as those operated by FanDuel and DraftKings -- amount to illegal gambling and violated a state prohibition on gambling.  The court upheld a lower court's ruling that the New York State Legislature unlawfully authorized the activity by classifying it as a game of skill, not a game of chance.

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Gov. Andrew Cuomo signed the 2016 law that granted the New York State Gaming Commission, which regulates such online games, to issue temporary permits to five fantasy operators: DraftKings, FanDuel, Yahoo, FantasyDraft and Draft.

Hours after the court's ruling, the state's gaming commission on its website still read: "Interactive Fantasy Sports are games of skill" -- the opposite position of the court ruling.

New York is not alone in seeing fantasy sports as a form of sports gambling. While 21 states currently have legal gambling or have passed bills for legalized gambling, according to Legal Sports Betting, five other states ban or have no daily fantasy operations: Oregon, Idaho Montana, Nevada and Arizona. Some states, such as the gambling capital of America, Nevada, have no fantasy operations because it is seen as gambling and as a gambling operation, a company such as DraftKings would require a state gambling license.

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The lawsuit challenging the constitutionality of the New York law was coordinated by the group Stop Predatory Gambling on behalf of four plaintiffs who had suffered personal or family harm from gambling debts.

"The reason New York state has a constitutional prohibition on commercialized gambling promoted by the state is because it's a form of consumer financial fraud," Les Bernal, national director of Stop Predatory Gambling, said Thursday. "This isn't about people having a Super Bowl office pool. This is about state government cheating and exploiting people, contributing to the huge debt culture in the state."

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New York does allow sports betting but only at its casinos in the Finger Lakes, the Capital region, Catskills and Southern Tier, as well as the state's seven Native American casinos.

A spokesman for Attorney General Letitia James said staff are reviewing the decision and haven't decided whether it will be appealed to the state's highest court, the Court of Appeals.

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FanDuel said in a statement, “We expect that there will be an appeal and we’ll be able to continue to offer contests while that appeal is decided.”

DraftKings also issued a statement saying that “the legislative action authorizing fantasy sports in New York was constitutional and in the best interests of taxpayers and fantasy sports fans.”

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The Associated Press contributed to this story