Quoted

Aug 5, 2016

Steven Eichorn Explains the Unintended Consequences of NY’s DFS Law

The New York law legalizing and regulating paid-entry fantasy sports has an interesting provision that could keep out smaller operators that took a legally conservative approach to the state, in addition to relatively new operators in the space.

The law just signed by Gov. Andrew Cuomo allows all fantasy sports operators to apply for a license in the state.

However, it also makes provisions for operators to serve the market almost immediately via atemporary permit. Here’s the relevant section of the law:

Any operator that was offering contests to persons located in New York state prior to the tenth of November, two thousand fifteen, may continue to offer contests to persons located in New York state until such operator’s application for registration has been approved or denied in accordance with section fourteen hundred three of this article, provided that such operator receives a temporary permit pursuant to subdivision two of this section and files an application for registration with the commission within ninety days of the promulgation of regulations to effectuate this article.

That November date is when NY Attorney General Eric Schneiderman issued cease-and-desist orders to FanDuel and DraftKings.

Steven Eichorn, an associate at Ifrah Law, said he believes the gaming commission erred in implementing the law on this point.

“The NYS Gaming Commission has apparently confused a sufficiency and necessityrequirements,” Eichorn told Legal Sports Report. “The point of the bill, which was likely pushed by DraftKings and FanDuel, was to ensure they — even though they operated in New York prior to the legalization of DFS — would still be eligible to receive a temporary permit after DFS was legalized.”

The intent of the law, if not the explicit language, was not to exclude operators that weren’t in NY before that date, Eichorn went on.

“Nowhere does the DFS bill require prior operations in NYS (in violation of the law) to obtain a temporary permit,” he said.

Most operators in the DFS industry would obviously not agree that prior New York law was even a gray area legally prior to the new law. But it’s at least an open question that will no longer be answered in the court, as part of a settlement involving Schneiderman, DraftKings and FanDuel.

But there are at least some smaller operators that steered clear of the New York market based on the law as it existed previously.

It would also stop any relatively new operator — one that launched after the November date — from being in the state immediately. (It’s not clear there are even any DFS operators in the latter set, as launching a US-facing site after November was not something on almost anyone’s radar.)

“The Gaming Commission’s application has made the prior operations a necessity, which borders on the absurd,” Eichorn said. “This requirement of having offered DFS to NYS residents is punitive to operators that clearly complied with NYS law by not offering DFS prior to its passage of this bill.”