CHICAGO, IL – OCTOBER 16: The fantasy sports website FanDuel is shown on October 16, 2015 in Chicago, Illinois. FanDuel and its rival DraftKings have been under scrutiny after accusations surfaced of employees participating in the contests with insider information. An employee recently finished second in a contest on FanDuel, winning $350,000. Nevada recently banned the sites. (Photo illustration by Scott Olson/Getty Images)
A New York appellate court on Thursday held that daily fantasy sports contests like those operated by FanDuel and DraftKings amount to illegal gambling under state law.
The appellate court upheld a lower-court ruling that the 2016 law authorizing daily fantasy sports contests violated the state's constitution by improperly expanding gambling in the state.
It also struck down a provision of the law that held daily fantasy contests were not considered to be gambling.
"(We) have rejected the Legislature's explicitly stated basis for the removal of IFS from the Penal Law definition of gambling," Justice Robert Mulvey wrote for the majority, using an acronym for fantasy contests. "Moreover, as part of the same legislation that decriminalized IFS, the Legislature clearly intended that IFS contests be heavily regulated."
It was not clear whether the ruling would have an immediate effect on the daily fantasy businesses, though FanDuel said it likely would not.
"We expect that there will be an appeal and we'll be able to continue to offer contests while that appeal is decided," the company said in a statement.
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DraftKings also defended its business in a statement.
“We believe the legislative action authorizing fantasy sports in New York was constitutional and in the best interests of taxpayers and fantasy sports fans," the company said.
WNBC's parent company Comcast Corp. was a past investor in FanDuel.
