Are Fantasy Sports Illegal Gambling?

• Author: Benjamin E. Long
• Pages: 23-24

Published in Litigation News Volume 47, Number 2, Winter 2022. © 20 22 by the American Bar A ssociation. Repro duced with permissio n. All rights reser ved. This informati on or any portion the reof may not be copie d or disseminated in any

form or by any means or sto red in an electronic da tabase or retrieval sy stem without the ex press writt en consent of the Amer ican Bar Associatio n.

age. The court held that the sharing

of data constituted a publication and

could therefore be considered a per-

sonal injury, discussing the def‌inition of

the word “publication” in the context

of both defamation and privacy claims.

The court further reasoned that the

policy’s violations-of-statutes exclusion

related to the means in which the infor-

mation was shared, not the BIPA data-

sharing violation itself.

Litigation Section leaders believe the

decision was correct. “The exclusion in

the West Bend policy was very narrow,”

notes Angela R. Elbert, Chicago, IL, for-

mer cochair of the Section’s Insurance

Coverage Litigation Committee. “Newer

policy exclusions specif‌ically refer to

violations of BIPA, and I expect that to

be the standard in the coming year,”

she predicts. She also adds that “once

carriers pick up a claim, they will add

this exclusion for the next policy year.”

“Illinois is alone among states with

a private cause of action for a tech-

nical violation,” observes Grace C.

Wen, New York, NY, member of the

Section’s Privacy & Data Security

Committee. Other states, such as

Arkansas, California, New York, Texas,

and Washington, currently regulate the

disclosure of biometric information, but

the goal is remedial rather than remu-

nerative. For example, the California

Consumer Privacy Act (CCPA) requires

exhaustion of other remedies before

bringing litigation. “The CCPA focuses

more on gaining consumer consent,

conf‌irming the information is correct,

and having it deleted if you want,” clari-

f‌ies Wen.

By contrast, BIPA has teeth.

Hefty penalties for technical viola-

tions—$1,000 for a negligent violation

and $5,000 for a reckless or inten-

tional violation—were probably a driv-

ing force behind Facebook’s $550

million settlement of class claims for

alleged facial recognition privacy viola-

tions. “Facebook didn’t have much of a

defense,” opines Wen. “All the class had

to do was show a technical violation.”

As a result, companies should

be aware of the risk and deter-

mine whether they have coverage.

“Businesses should take data privacy

seriously,” advises Wen. “With more

personal information available, it is

more likely that a private company is

going to be subject to litigation for dis-

closure of the data.”

And be dogged in seeking coverage,

counsels Elbert. “Every litigator should

look for insurance coverage when their

client is sued for BIPA and CCPA viola-

tions. Don’t take no for an answer.”

Are Fantasy Sports

Illegal Gambling?

By Benjamin E . Long, Litigation News

Tea m Edit or

Fantasy sports contests have been

declared illegal in at least one state,

but the issue appears far from resolved.

Although the New York Supreme

Court’s Appellate Division upheld a

lower court ruling that fantasy sports

contests violate that state’s constitu-

tional ban on gambling, ABA Litigation

Section leaders believe further litigation

is inevitable in New York and elsewhere.

Article 1 section 9(1) of the New York

State Constitution outlaws “lottery or the

sale of lottery tickets, pool-selling, book-

making, or any other kind of gambling.”

The clause continues by stating that

“...the legislature shall pass appropriate

laws to prevent oenses against any of

the provisions of this section.” In 2016,

the New York State Assembly amended

Article 14 of New York’s Racing, Pari-

Mutuel Wagering and Breeding Law

to declare that fantasy sports betting

should not be included in the def‌inition

of gambling.

Several individuals who claimed their

lives were negatively aected by gam-

bling sued for declaratory judgment.

In White v. Andrew Cuomo, et al., they

claimed the 2016 statutory amend-

ment violated the state constitution

and demanded that the court enjoin its

implementation. The trial court granted

partial summary judgment in favor of

the plaintis, agreeing that the amend-

ment was unconstitutional.

On appeal, the appellate court

rejected a def‌inition of “gambling”

as turning on whether an element of

chance or an element of skill is the

dominating element that determines

the outcome of the activity. Instead,

it looked to the New York Penal Code,

which refers to gambling as risking

something of value in a “contest of

chance” in hopes of receiving some-

thing of value in return in the event of

a particular outcome. The penal code

def‌ines “contest of chance” as a con-

test in which the outcome depends

in a material degree on an element of

chance, despite the fact that skill may

also be a factor.

The court reasoned that the penal

code’s def‌inition of “contest of chance,”

separately adopted by the state legisla-

ture, rejects the argument that chance

must be the dominating element. Under

that def‌inition, fantasy football contests

are “gambling” within the meaning

of New York’s constitution. The court

observed that fantasy football partici-

pants convey value by paying an entry

fee to participate in the contest, with

the goal of winning something of value

in return for performing well.

Fantasy football participants select

teams of professional football players

and compete against other partici-

pants to see which fantasy team earns

the most points. Skill is certainly a fac-

tor, the court recognized, given that

research shows fantasy football lineups

chosen by participants consistently

beat those chosen at random. Also, a

relatively smaller percentage of par-

ticipants win a much larger percentage

of the prizes. However, fantasy foot-

ball participants cannot control how

the athletes will perform. Injury, illness,

weather conditions, and poor ociat-

ing may play a substantial factor in a

particular player’s success.

The future of fantasy football con-

tests is uncertain in New York, and “it

is unclear how this ruling might aect

other jurisdictions,” says Tracy A.

DiFillippo, Las Vegas, NV, cochair of the

Litigation Section’s Pretrial Practice &

Discovery Committee. “The court’s rul-

ing is tied to its unique state constitu-

tion and statutory law,” she adds.

Adam E. Polk, San Francisco, CA,

cochair of the Section’s Class Action &

Derivation Suits Committee, explains

that “fantasy football is a very lucrative

business.” Polk believes the New York

legislature attempted a law change “to

allow fantasy sports companies like

FanDuel and DraftKings to operate in

an extremely prof‌itable market,” given

that “people of New York presumably

comprise a signif‌icant portion of that

revenue.”

Though the attempt was initially

unsuccessful, Polk expects that “the

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