Here's the transcript of the court hearing in New York state the attorney general filed for a preliminary injunction against DraftKings, FanDuel and Yahoo daily fantasy sports.
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INDEX NO. 453054/2015
FILED: NEW YORK COUNTY CLERK 11/30/2015 12:31 PM
NYSCEF DOC. NO. 106
RECEIVED NYSCEF: 11/30/2015
In The Matter Of:
People of the State of New York v.
DraftKings, Inc.
November 25, 2015
Original File 25NOVEMBER2015 DRAFTKINGS.txt
Min-U-Script® with Word Index
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SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK:
CIVIL TERM PART 13
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THE PEOPLE OF THE STATE OF NEW YORK
by ERIC T. SCHNEIDERMAN, Attorney General
of the State of New York,
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Plaintiff,
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- against -
INDEX NUMBER:
453054/2015
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DRAFTKINGS, INC.,
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Defendants.
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71 Thomas Street
New York, New York
November 25, 2015
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BEFORE:
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HONORABLE MANUEL J. MENDEZ, Justice.
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APPEARANCES:
STATE OF NEW YORK
OFFICE OF THE ATTORNEY GENERAL
ERIC T. SCHNEIDERMAN
Attorney for the Plaintiff
120 Broadway
New York, New York 10271-0332
BY:
KATHLEEN A. McGEE
KARLA G. SANCHEZ
JORDAN SALBERG
AARON CHASE
JUSTIN WAGNER
ASSISTANT ATTORNEYS GENERAL.
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(Continued on next page.)
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APPEARANCES:
(Continued)
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BOIES, SCHILLER & FLEXNER LLP
Attorneys for the Defendant
595 Lexington Avenue, 7th Floor
New York, New York 10022-6138
BY:
DAVID BOIES, ESQ.
JONATHAN SCHILLER, ESQ.
JOSHUA I. SCHILLER, ESQ.
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GIBSON, DUNN & CRUTCHER, LLP
Attorneys for the Defendant
200 Park Avenue
New York, New York 10166-0193
BY:
RANDY MASTRO, ESQ.
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Margaret Baumann
Anne Marie Scribano
Official Court Reporters
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SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK:
CIVIL TERM PART 13
- - - - - - - - - - - - - - - - - - - - - - X
THE PEOPLE OF THE STATE OF NEW YORK
by ERIC T. SCHNEIDERMAN, Attorney General
of the State of New York,
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Plaintiffs,
INDEX NUMBER:
- against 453056/2015
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FANDUEL, INC.,
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Defendant.
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71 Thomas Street
New York, New York
November 25, 2015
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BEFORE:
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HONORABLE MANUEL J. MENDEZ, Justice.
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APPEARANCES:
STATE OF NEW YORK
OFFICE OF THE ATTORNEY GENERAL
ERIC T. SCHNEIDERMAN
Attorney for the Plaintiff
120 Broadway
New York, New York 10271-0332
BY:
KATHLEEN A. McGEE
KARLA G. SANCHEZ
JORDAN S. SALBERG
AARON CHASE
JUSTIN WAGNER
ASSISTANT ATTORNEYS GENERAL.
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APPEARANCES:
(Continued)
DEBEVOISE & PLIMPTON, LLP
Attorneys for the Defendant
919 Third Avenue
New York, New York 10022
BY:
JOHN S. KIERNAN, ESQ.
DAVID SARRATT, ESQ.
MATTHEW E. FISHBEIN, ESQ.
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Margaret Baumann
Anne Marie Scribano
Official Court Reporters
that they would like a little more time in order to make
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their arguments, so the Court is prepared to do the
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following:
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The Court is going to give each side one hour,
one hour.
You use your time whichever way you see fit.
I
am giving you one hour.
So we are going to go between now and 1:05 at which
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time we will stop, break for lunch, and reconvene at 2:05
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when the other side will then argue, if you want.
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want to leave some time in your argument to rebut or reply
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to the other side's argument, make sure that you leave ten,
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fifteen minutes at the most.
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If you
Okay.
So, we had four motions last week.
Two weeks ago I
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heard some motions on from the Plaintiffs, then DraftKings
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and FanDuel, and I adjourned those matters to today.
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The Attorney General has filed additional papers,
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not only in opposing the motions that were previously made,
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but also moving for a preliminary injunction, so I guess we
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will hear those first.
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Argument on all the motions at the same time.
I'll
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have the State go first, and then it will be followed by
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defendants in the State's case, which is FanDuel and
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DraftKings.
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So, who is going to argue on behalf of the State?
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MS. McGEE:
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I am, your Honor.
Good afternoon.
Kathleen McGee.
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THE COURT:
Before you begin --
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MS. McGEE:
Yes.
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THE COURT:
-- look at the clock.
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MS. McGEE:
Yes, sir.
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THE COURT:
So it begins now.
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MS. McGEE:
Thank you, your Honor.
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Today the State is before you pursuant to Executive
It is 1:08.
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Law 6312 to request that this Court grant a preliminary
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injunction against Defendants, DraftKings and FanDuel, to
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enjoin them from promoting and operating illegal gambling in
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New York State.
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Section 6312 purposefully allows for this expedited
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relief when the State can demonstrate a likelihood to
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succeed on the merits, that there is irreparable harm in not
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granting the relief, and that the equities weigh in the
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State's favor.
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The State has clearly met its burden here today.
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That we will discuss, use the majority of our time to
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discuss the main issue before the Court which is
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demonstrating that we are likely to succeed on the merits
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because DraftKings and FanDuel are promoting and operating
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illegal gambling.
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Gambling is illegal in New York pursuant to our
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Constitution with three enumerated exceptions, not including
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fantasy sports.
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How do we know whether or not something is
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gambling?
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definition has three elements:
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We looked to Penal Law Section 225.
The
One, that there is an agreement that the bettor
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receive something of value when a certain outcome does
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occur, and he does.
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This is undisputed.
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He receives prizes of up to $1 million.
Second element that the bettor, quote, "stakes
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something of value," unquote, upon a particular outcome.
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does.
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No matter what you call it, entry fee, wager, bet,
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or stake, the bettors stake something of value.
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money.
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code as including money.
They stake
Indeed, something of value is defined in the penal
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The last element is whether the outcome depends on
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a future contingent event not under his influence or
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control.
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He
I would like to focus, your Honor, on this standard
now.
So what is the future contingent event out of the
control or influence of the bettor?
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For daily fantasy sports, it is the performance of
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athletes in real world games which no daily fantasy sports
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bettor can control.
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In the words of FanDuel, the outcome of the game
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is, quote, "contingent on the positive performance of all of
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their players," unquote, in the real sports events.
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fact, if the athletes do not perform or the games are not
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held, there can be no daily fantasy sports
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winner or loser.
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The winner of each daily fantasy sports contest is dependent
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on what happens in the real games and no one can foresee
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what will happen in any of those real games.
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Bettors win or lose points based on how many yards
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are rushed or runs batted in, whether there was a touchdown,
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or a fumble at the goal, how many sacks there were, which
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players were benched, whether the game was suspended, and so
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on and so on.
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Each of these events is out of the control of the
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bettor.
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influence how many yards a player runs or how many goals he
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scores, what plays are run, or even whether he slips on the
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turf because it is wet from the rain.
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There is absolutely nothing they could do to
For example, in People v. Wright, the Court
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affirmed the conviction of a man charged with gambling.
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that game, bettors selected one baseball team for every day
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of the week with the exception of Sunday, and, at the end of
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the week, the pool teller -- pool seller, rather, tallied up
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the runs scored by each team and made cash payouts to the
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bettors whose 16 combinations scored the most cumulative
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runs.
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The Court recognized that this scheme, a forerunner
of contests, like daily fantasy sports was gambling.
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In short, when I play DraftKings or FanDuel, I
place my bet, I pick my team, and then I watch TV.
The rest
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is up to the athletes, and all I can do is watch the event
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unfold before my eyes, perhaps, while yelling at the TV a
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bit.
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Your Honor can stop right there.
The State has
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demonstrated all three elements, and, thus, has a likelihood
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of success on the merits.
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But, if you need another reason to find that the
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Defendants are engaged in promoting and operating illegal
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gambling, daily fantasy sports is also a game of chance
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under the Penal Law.
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Again, we have demonstrated that something of value
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was wagered and that there is an agreement to receive
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something of value.
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The third element as an alternative to the question
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of whether the outcome is based on a contingent event is
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whether the bettor is involved in a contest of chance.
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An illegal contest of chance is defined in the
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Penal Law as any contest, game, gaming scheme, or gaming
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devise in which the outcome depends in a material degree
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upon an element of chance, notwithstanding that skill of the
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contestant my also be effective therein.
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The test of the statute is clear.
The only inquiry
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the Court must make to determine whether daily fantasy
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sports are contests of chance is whether the games played on
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the daily fantasy sports sites depend on chance to any
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material degree.
The facts shows squarely that they do.
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pervades daily fantasy sports.
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uncertainty of sports events in the real world.
Chance
Outcomes depend on the
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The list of chance occurrences that directly affect
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whether someone wins or loses a daily fantasy sports game is
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limitless:
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An athlete injury, a fluke, lucky shot, a streak, a
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tipped ball, dropped pass, missed tackle, even the weather
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on any given day, especially if a game is rained out.
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of those chance occurrences determine who wins and who loses
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daily fantasy sports contests.
All
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It is crucial for the Court to understand that
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skill can play some role in who does better or worse in
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Fantasy Sports contests and that is what their experts say.
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But, this is obvious.
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exhibit skill, that skill at gambling.
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Some exceptional bettors
Some bettors study
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box scores more than others.
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hit or stand in blackjack.
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material in many forms of gambling.
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Some know the best times to
Skill and chance are both
But the simple fact is that chance is material to
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daily fantasy sports games.
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daily fantasy sports games, and when chance is a material
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element in daily fantasy sports games, New York law is clear
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it is illegal gambling, and that is the text of the statute,
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It is actually inherent in
and the Court need go no further.
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The Defendants today advocate for a different test,
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they advocate for a dominating element standard, but that is
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not the law.
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The Defendants make much of People v. Lavin.
That
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case determined that a bunt, a game wherein bettors guessed
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the number of cigars that would be taxed in a given month
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was a game of chance because chance was a dominating element
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in the game.
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standard in New York for contests of chance for years.
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50 years after Lavin, the legislature changed the law.
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And that phrase "dominating element" was the
Now, the statute asks whether the outcome depends
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in a material degree upon the element of chance
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notwithstanding the skill of the contestants.
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does not say anything about dominating elements.
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For
The statute
What it says is a game of chance exists even if a
bettor uses skill.
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So the Court should not apply Lavin or any other
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case using a dominant element test because that has been
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long superseded by statute.
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because this legislative change dispensed with the difficult
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and, frankly, the impossible task for a Court to attempt to
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quantify with any real certainty the amount of skill or luck
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involved in a game.
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This is particularly important
Before Mr. Wyner was hired as an expert for FanDuel
he said this, quote:
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"I can play both sides of this.
If DraftKings
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wanted to hire me as an expert to prove that it is a game of
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skill, sure, easy to do.
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that it is a game of chance, easy to do.
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bizarre.
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drive a car through either side of the argument," unquote.
If Connecticut wanted to prove
Now, that sounds
It is just the law is not well defined, so I could
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Another expert for defense opined in his submission
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to the Court that the skill chance, quote, "determination is
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difficult to make because there is no well defined principal
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in mathematics or statistics that can be used to measure the
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precise influence that chance has over the outcome of a
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contest or game," unquote.
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That is why the Court need not concern itself with
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all of the various expert affidavits submitted by
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Defendants.
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more skilled at gambling than others, and I don't concede
All they do is suggest that some players are
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that those affidavits even support the conclusions they
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reach.
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But those analyses don't change anything.
If
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chance is a material element of these games, it doesn't
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matter how much quote/unquote "skill" is purportedly
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involved.
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They are illegal gambling.
So even exempting that all of those analyses put
forth by defendants, the State has still demonstrated that
DraftKings and FanDuel are in violation of the law.
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I would add that if the Court were to apply the
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dominating element test of Lavin as the Defendants suggest,
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the daily fantasy sports operators are still in violation of
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the law.
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games it is the dominating factor.
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That is because chance is so inherent in their
The very case defendant stakes so much on, Lavin,
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is strikingly familiar to the case before the Court.
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bettors there were armed with statistical history about past
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performance and asked to make a bet about future events:
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The number of cigars taxed in a given month.
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abilities of the bettors to analyze the statistics at hand,
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however well informed they were about the economics of the
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cigar trade, however good they were at predicting the
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future, the Court found that the guessing involved made it a
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contest of chance, and, therefore, illegal.
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One moment.
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Whatever the
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In light of the clear legal prohibition on their
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conduct, the Defendants conjure up several dubious arguments
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to strive to save their gambling enterprise.
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them briefly here.
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I will address
First, there is no factual disagreement between the
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parties about how these games function.
No one disputes
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that the athletic performances upon which these games are
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based are uncontrollable by the bettors and conversely, that
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the lineups are controlled by the bettors.
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they constitute staking value on a future contingent event
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is purely a question of law.
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Thus, whether
Next, the Defendants make what is essentially an
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estoppel or laches argument.
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to the State in our enforcement of the law.
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bring action within the statute of limitations we cannot be
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estopped from enforcing the law.
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These doctrines do not apply
As long as we
Following this, the preliminary relief requested by
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the Defendants, for the same reason that this Court denied
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the temporary restraining orders last week, any requests for
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a preliminary injunction by Defendants must also be denied.
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With respect to the Humphrey decision, which
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DraftKings counsel described last Monday as being pivotal to
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this success before this Supreme Court, a few words need to
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be spent.
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The case is unpublished and from a New Jersey
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federal court, and so, obviously, it lacks any precedential
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value, and the portions relied on by Defendants were already
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also decided after the Court had already dismissed the
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action for failure to state a claim so they are dicta.
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Moreover, despite defendants' repeated statements
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to the contrary, Humphrey is not interpreting even the New
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Jersey gambling statute.
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The Court deals with the New Jersey qui tam statute
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that provides relief to bettors seeking to recover their
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gambling losses.
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of Fantasy football is legal under New Jersey's gambling
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statute, it never opines on what is a game of chance, and it
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never opines on a future contingent event.
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irrelevant to the facts here.
As such, it never opines whether any type
It is completely
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The Defendants use Humphrey and other cases in an
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attempt to conflate the clear elements under New York law.
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First, they take the Court's interpretation of the
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word "bet" and the word "wager," under the New Jersey qui
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tam statute and attempt to apply it to the New York gambling
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statute.
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Yet those words are not in New York's gambling
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definition.
The words in New York statute are,
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quote/unquote, "something of value," which as we already
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discussed means money.
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a foreign qui tam statute cannot change that.
A court's interpretation of words in
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Next, they attempt to argue that if there is an
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entry fee and a prize, there can be no gambling.
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the inquiry here in New York never ends there.
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must undertake to determine whether there is a future
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contingent event and, alternatively, a contest of chance.
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Only after that analysis can a decision on gambling be made.
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But again,
The Court
The Defendants then spin this analogy further out
of control and sound the alarm that the Attorney General is
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criminalizing all types of gaming:
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spelling bees.
Chess, investing, bingo,
That is just not true.
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THE COURT:
Not spelling bees.
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MS. McGEE:
I'm sorry?
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THE COURT:
Not spelling bees.
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MS. McGEE:
Not spelling bees, your Honor.
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In
fact, I'll elaborate on that a bit.
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The only game at issue here is daily fantasy
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sports.
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spelling bees.
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an entry fee and the prize, the outcome is one they could,
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obviously, influence, spelling the right word.
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No one is attacking bingo marathons, investing or
In those competitions, while the players pay
If, however, someone ran a website taking millions
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of dollars and bets placed on the outcomes of spelling bees,
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that would be illegal gambling because the spelling bee is
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the future contingent event.
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hours poring over the grammar school educations of the
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Even if the bettors spend
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spelling bee contestants and running algorithms to determine
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which words were likely to be presented, and even if the
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bettors could put together fantasy team comprised of
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competitors in various different spelling bees, I know it is
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a bit laughable, but so is the Defendants' spelling bee red
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herring.
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There is a critical distinction between paying for
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yourself to enter a contest and betting on others.
Daily
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fantasy sports is about betting on what others do.
That is
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gambling.
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The Defendants' contests are not a bunch of clicks
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of the mouse or taps of an iPhone.
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beyond the computer scheme on the field of each real-life
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athletic competition upon which the success or failure of
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these wagers are based, beyond this computer screen.
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It is what is happening
What DraftKings and FanDuel really offer is a way
to bet on sports.
Top bettors win all the money.
Defendants make much in their papers about the fact
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that in daily fantasy sports the vast majority of winnings
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go to a slim minority of top bettors.
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bettors may win more often, but that is true of many forms
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of wagering.
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predicting the odds.
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High performing
That just means that they're better at
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Under the law, whether a bettor is superior to
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others at making her predictions is irrelevant to the
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question of whether she is betting on a future contingent
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event not under her control or influence.
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betting.
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It is still
The game of poker has been declared unlawful
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gambling in New York as a game of chance and yet, as we all
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know, some poker players are far more successful than
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others.
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Poker games.
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game of chance under New York law.
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exerting control or influence over the outcome of each hand
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played:
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We see them on TV winning their World Series of
But that success does not eliminate poker as a
In poker, the player is
Fold, raise, ante, bluff or go all in.
The defendants here attempt to distinguish poker
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because they say having cards dealt is an element of chance.
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But that's just the order of chance.
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sports, the element of chance comes later in the game when,
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once the daily fantasy sports bettor sets their line-up, she
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has no control or influence over the outcome of the game.
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In daily fantasy
Behind closed doors, DraftKings and Fanduel agree,
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their presentations to investors have literally included
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comparisons to other forms of gambling and describes their
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operations in gambling terms.
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and Fanduel are promoting and operating gambling.
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gambling because their games rely on a future contingent
And that's because DraftKings
They're
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beyond the player's control or influence.
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because they are games where chance is a material factor in
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the outcome.
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Fanduel are promoting and operating gambling.
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They're gambling
Any way one looks at it, DraftKings and
The irreparable harm is presumed by law when
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enforcing a statute, as the State does in this case.
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it's clear that, with every day that the defendants promote
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and offer illegal gambling, the harm to New Yorkers grows.
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And
And the equities weigh overwhelmingly in the
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State's favor, as set out more fully and completely in our
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briefs.
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DraftKings and Fanduel are promoting and offering
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illegal gambling in New York State, period.
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the Court to enter a preliminary injunction enjoining the
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defendants, DraftKings and Fanduel, from promoting and
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offering their daily sports betting in New York State.
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Today we ask
To be clear, we are not requesting that this Court
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shut down DraftKings and Fanduel.
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operate in other jurisdictions, if it is legal to do so
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there.
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They will be free to
At this time, your Honor, I'd like to reserve the
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rest of our time for rebuttal.
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THE COURT:
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Between now and 1:00 o'clock, I'll hear the
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defendant.
You have 30 minutes for that.
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Who wants to go first?
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MR. KIERNAN:
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John Kiernan for defendant, Fanduel.
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As you say, we are also the claimants in our
Thank you, your Honor.
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request for an injunction, but we are also defendants in the
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State's motion for an injunction.
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I think maybe it's useful to start on a point of
common ground, because, remarkably, there is a beginning
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point of common ground here, which is the recognition that
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there is a category of event called a true contest that the
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State agrees with us is not a gambling event, even though it
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involves the conveyance of an entry fee and the payment of
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prize money to the winners.
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The State says on page 3 of its brief "Paying an
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entry fee as a competitor in a true skill game is not
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gambling.
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prizes."
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Everyone that enters will receive pre-announced
And on page 22 "Entry in a bona fide skill game is
not gambling."
And that's something that's been recognized by
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many courts, by the Fallon and Humphrey courts.
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court here in New York, the Humphrey court in New Jersey,
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the American Holiday Association court in Arizona.
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The Fallon
And it's the source, ultimately, your Honor, of
that long list that you've heard snippets of, of the kinds
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of contests that have entry fees and they have prizes to the
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winners.
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But everyone agrees that, not only are they not
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gambling, they're a valued and recognized part of the
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American social fabric.
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fishing contests, your hole-in-one contests, your essay
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contests, your county fair competitions of all kinds, your
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beauty contests, marathons and other road races.
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And that's your spelling bees, your
And you could go on, because this is such a
well-recognized component of the American scene.
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And whether one of those contests take place on
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the internet or just in real life isn't a factor that goes
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into the analysis.
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is there a preannounced prize and is there what the State
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calls a true contest, that is a contest of skill.
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contests have been recognized many, many times.
18
court after court has said, including the ones I just
19
identified, once it's recognized to be a true contest, it's
20
actually not necessary to do any kind of fine calibration to
21
determine how much is skill and how much is chance in the
22
contest.
23
The analysis is, is there an entry fee,
And those
And as
In fact, the way the courts resolve it is that
24
they say that, in those contests, the payment of the entry
25
fee is not a wager, is not a bet and, under New York
26
formulations, is not staking or risking something of value,
22
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Proceedings
which is the same thing as a wager or a bet.
So the State, as I say, does not dispute the
4
existence of these true contests as reflected by the
5
comments just now.
6
contest type of event is not applicable to fantasy sports
7
for two reasons.
8
What they're saying is that the true
By the way, just to go back to the statute, if
9
you've established that it's not an entry fee, that an entry
10
fee is not a wager or staking or risking something of value,
11
then you don't even need to get to the second half of the
12
statute that asks whether it's a contest of chance or it's
13
staking something on a contingent future event not under the
14
participant's control, because you're done at the beginning.
15
And that's why, for example, we'll talk about
16
Humphrey in a minute, why Humphrey found it unnecessary to
17
reach the degree to which fantasy sports were a contest of
18
chance, not because it would not be relevant under the New
19
Jersey gambling statute, but because at the threshold of
20
fantasy sports were not a gamble, wager or stake under New
21
Jersey law.
22
So the State says there are two reasons why
23
fantasy sports contests are not contests, true contests
24
within that meaning.
25
26
The first is, as you've heard here today that they
say that they're contests of chance.
23
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2
And then the second is they say that that fantasy
3
sports participants are not participants in a contest,
4
they're mere observers, just like gamblers at a sporting
5
event, just like, as the example just given, like the
6
observers in a spelling bee.
7
contest.
8
9
10
They have no influence on any
They're simply gambling.
Let me take those in turn because both of them are
wrong.
First, on the contest of chance, fantasy sports
11
contests are contests of skill under any reasonable
12
definition of the term.
13
The State hasn't really contested, in fact, it
14
just reaffirmed in the comments just now, the concentration
15
of winning that occurs in fantasy sports contests, which is
16
consistent with its character as a game of skill.
17
fact, the State has stressed that concentration of winning
18
in more skilled players, even though it reinforces the
19
degree to which these contests are contests of skill and
20
note that concentration occurs, not only in massive
21
tournaments, but also in the 50-50 contests and the
22
head-to-head contests that Fanduel and other fantasy sports
23
sponsors hold, where everyone who enters has statistically a
24
50 percent chance of winning.
25
enormous concentration of skill in the winner, in the more
26
skilled -- of wins in the more skilled players.
And, in
You still see the same
24
1
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2
Now, we've submitted with our papers the affidavit
3
of MIT professor Hosoi, who has been conducting a multi-year
4
longitudinal study; that is, the study is over a multi years
5
of performance of Fanduel competitors.
6
consistent with recognizing that fantasy sports are contests
7
of skill in three particular ways worth identifying.
And her results are
8
First, the studies show result differentiation.
9
That is, Fanduel competitors consistently, overwhelmingly
10
consistently, outperform, not only random selections of
11
competitive rosters, fantasy rosters, but also rosters that
12
have been adjusted to simulate some degree of skill.
13
Nevertheless, the Fanduel players enormously and
14
consistently outperform them.
15
The second is replication, which is a common
16
question of skill.
17
overwhelmingly, that the most skilled players remain the
18
most skilled players; the middle level players remain
19
generally middling; and the poor players remain poor players
20
in a way that would be consistent with a skill-based kind of
21
contest.
22
And what her tests show is,
And the third is improvement over time.
That is,
23
her studies overwhelmingly demonstrate that people who
24
participate in these contests longer and longer get better
25
and better at it.
26
Now, all those three characteristics are
25
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2
consistent.
3
contest of skill.
4
In fact, they're powerfully indicative of a
Now, what the State says is, well, it's skill.
5
They actually, apparently, don't contest that it's skill.
6
It's just skill at gambling.
7
your Honor.
8
That's just characterization,
What the fantasy sports contestants believe is
9
they're developing skill at the game that they're playing,
10
which is selection of a roster of players that they believe
11
will outperform another set of rosters of players selected
12
by other people, all of whom are engaged in this
13
fascinating, compelling game that's brought in 50 million
14
users in the United States of trying to replicate the
15
experience and the challenge of being a general manager or a
16
coach of picking players based on how they're expected to
17
perform and pitting your skill at picking those players
18
against the way other people pick players.
19
contest.
20
That's a
It's in the nature of a contest, your Honor.
Now, the fundamental approach of the State, we're
21
talking about contests of chance, in its papers and again
22
today, is to suggest that, if there's a possibility the
23
single contingent event could cause the result of a contest
24
to change, then that's a chance event.
25
26
Now, the State, unsurprisingly, cites no authority
for that proposition, because it makes no sense and it is
26
1
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2
actually fundamentally incompatible with the definition of
3
contest, because that is a feature of every single content.
4
Fluke events.
5
blown call, a change in weather, the one word that the
6
spelling contestant doesn't know, even though he or she has
7
studied every other word in the dictionary, can change the
8
outcome.
9
made contests contests of chance, then there would be no
And the State identified some of them.
That is a characteristic of contests.
10
such thing as a contest of skill.
11
recognized that there are many contests of skill.
A
And if that
The courts have
12
But the right way to think about this and the only
13
sensible way and the way recognized by the Court is to think
14
about it in terms of probabilities.
15
What is skill?
Skill is the tendency or the
16
capacity of someone, through the application of effort and
17
aptitude, to increase the probability of a favorable result
18
in a contest or another endeavor over what would happen if
19
it occurred at random.
20
Or, to cite the Tillman case, which is not cited
21
in our brief, but can be found at 13 Misc. 3d 736, a 2006
22
decision, "A game of skill, although the element of chance
23
cannot be eliminated, is one in which success depends
24
principally on the superior knowledge, attention, experience
25
and skill of the player, whereby the elements of luck or
26
chance in the game are overcome and proved or turned to his
27
1
2
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advantage."
3
Or, if you think about the Nevada Supreme Court's
4
decision in the Hole-In-One case that we discussed in the
5
brief, your Honor, it's actually a good example.
6
Supreme Court said there was ample basis for the trial court
7
to conclude that the hole-in-one contest was a contest of
8
skill, even though there was testimony -- they established
9
things that were intuitively clear; that is, as even a
10
non-golfer like me can recognize, what skill will do is
11
increase the capacity of a competitor to get the ball more
12
often of the time closer to the hole on a shot where he'll
13
have the best opportunity to drop into the hole.
14
you're going to have to combine it, as the Nevada Supreme
15
Court recognized, with some element of luck, about which
16
ball is actually the first one to drop in.
17
alter that the contest is one of skill, because the skill is
18
the capacity to increase your probability for succeeding.
19
And that's true, even though it's at all times possible that
20
a duffer could just come up, step up and defy all the laws
21
of probability and accomplish the feat, even before the
22
skilled players do.
23
The Nevada
Now,
And that doesn't
Skill, nevertheless, remains the capacity, through
24
effort and aptitude, to increase your probability of
25
outcome.
26
outcome of a single event.
And it can't be measured any time based on the
28
1
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2
The State is right that, in any sporting contest,
3
all kinds of flukes, within or outside the control of the
4
players -- the gust of wind, the bad call are good examples
5
of things that are outside the control of anybody on the
6
field, can't be influenced by anyone on the field.
7
change the result of an individual contest.
8
measure whether the game -- the contest is one of skill or
9
luck based on that.
They can
You can't
10
What skill does is it puts players in the position
11
so that they are close to winning and then the fortuities of
12
the laws of probability take over from there and they can
13
cause all kinds of things that make watching contests fun
14
and enjoyable.
15
that are associated with how the laws of probabilities play
16
out.
17
million dollars over a single Fanduel contest when others
18
are more skilled, because that's the way it can break in an
19
individual instance, just like the duffer hitting the hole
20
in one.
21
nature of the endeavor.
They create upsets, they create the dynamics
They can even cause an inexperienced player to win a
But it doesn't alter the fundamentally skill-based
22
So what we have here is, clearly, a skill-based
23
endeavor.
And that, your Honor, we submit, is absolutely
24
consistent, as it must be, because it must proceed
25
logically.
26
consistently viewed as how you think about this luck versus
It is consistent with what the courts have
29
1
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2
skill thing in a contest where, the State's right,
3
calibration of exactly what, how much makes something skill
4
or luck is a difficult one.
5
Although Professor Hosoi's analysis does point out
6
and explains, at length, for example, how the skill-based
7
results of fantasy sports are much higher than that of, for
8
example, poker, which the Court relied on.
9
at a different level of skill, skill-based reliability or
10
You're operating
capacity to achieve a favorable result.
11
But that's -- we explain in our briefs all the
12
courts that continue to use the dominating element test that
13
was articulated by the New York Court of Appeals before the
14
statute was applied.
15
We cite all the authorities that recognize that,
16
when State attempted to codify the Penal Law on this subject
17
in 1965, there was an elaborate effort to treat that as a
18
capturing of the common law, including the law stated by the
19
highest courts in the State, not an attempt to alter it, as
20
the State asserts today.
21
And there are numerous cases that have taken that
22
more material element standard that the Courts relies on, in
23
its comments to you today and in its papers, and recognize
24
that what that must mean still is you look fundamentally at
25
what is the fundamental character of the event, of the
26
contest.
If the fundamental character of the contest is one
30
1
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2
where the application of aptitude and effort significantly
3
affects the prospects -- significantly improves the
4
prospects of prevailing in the contest, that is a contest of
5
skill, no matter whether, as is the case in any contest, an
6
individual instance will lead to a result that is different
7
from what the laws of probabilities would say is the norm.
I don't think that they are -- I believe that what they are
4
arguing is the fact that you have the skill to pick the
5
players, fine, you have that skill.
6
on someone else's skill to play the game, and that is your
7
contingency there, how that other person performs.
8
9
10
MR. KIERNAN:
But now you are relying
So let me turn to that, your Honor,
because you are absolutely right.
THE COURT:
And I think that is what happened in
11
Gibson also, the case you cited in your brief, where the
12
golfer paid to enter, and then that golfer went and took the
13
shot, whether he hits a hole-in-one, but the golfer is doing
14
it himself.
15
Well, the court says that's skill.
16
put it in, fine; if not, you are betting on yourself
17
basically, that's your skill.
18
someone else to do it.
19
If you could
You are not relying on
MR. KIERNAN: You are exactly right, and you've
20
gotten to exactly what is the central nub of our dispute,
21
the central nub of our difference with the State because our
22
contention on that, you have identified it correctly, it is
23
the central issue.
24
participants are mere observers of the contest being played
25
by somebody else or are actually participants in their very
26
own contest that is separate and apart from the contest that
It is whether fantasy sports
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Proceedings
is taking place on the field.
And there are two characteristics, your Honor, of
4
fantasy sports.
We talked actually already about what
5
fantasy sports are, that the nature of the fantasy sports
6
contestants is, fantasy sports contestant says, there is a
7
skill I think I could develop.
8
general managers or coaches, generally.
9
identify a roster of players that is a superior performing
I think I can do better than
I think I could
10
roster of players.
11
me to follow football because I'll find myself watching an
12
Arizona Cardinals, Atlanta Hawks -- Atlanta Falcons, sorry,
13
game at 11:00 at night because I thought there was a player
14
there that I wanted to evaluate.
15
By the way, that makes it more fun for
So there is an evaluation of players, but there is
16
an assessment of the value of the capacity for performance
17
of those players that is the characteristic activity of
18
fantasy sports, a separate contest.
19
Now, there are two characteristics of that contest
20
that set it apart from all the analogies that this State
21
offers about the person who is watching the spelling bee or
22
betting on the chess game.
23
The first is that there is a purposeful and
24
elaborate detachment of fantasy sports from the actual
25
outcomes of the games and that happens in a couple of ways.
26
First, the rules of fantasy sports says that when
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33
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2
you are putting together your team, you are required to
3
diversify your team, your roster across a bunch of different
4
teams, so that your outcomes are detached from the outcomes
5
of the individual games.
6
But the roster that you select, obviously, those
7
eight or ten people, whatever the number is in a particular
8
contest, never step onto a field together.
9
onto a field against anybody else.
10
11
They never step
They're detached from
those, from those contests.
And, of course, the outcomes of the underlying
12
football games are really almost indifferent to the fantasy
13
sports competitor, that is the team could lose, but the
14
selected roster person can perform fantastically, or the
15
team can win and the selected person can perform terribly.
16
When the statute talks about staking something on
17
the outcome of an event, the outcome that the fantasy sports
18
player is interested in, is relevant to the fantasy sports
19
player, is the outcome of this separate contest, and that is
20
the essence of fantasy sports.
21
Now, the second element of fantasy sports that
22
similarly sets it apart and makes it different and makes it
23
different from just somebody who is gambling on an event as
24
the State has stated is indistinguishable from fantasy
25
sports is the degree how fully realized.
26
The Court knows, the Court knows that fantasy
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34
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2
sports are played by 50 million Americans.
3
who write books and read books and study up on players and
4
talk about the performance of their fantasy league.
5
separate -- it is a fantasy, it is particular -- it is
6
especially a fantasy context because of that detachment from
7
the actual games that I talked about, but is a complete
8
fantasy contest.
9
There are people
It is a
Participants in competitions for fantasy sports
10
feel like competitors.
11
regularly work very hard to select their teams.
12
believe that their efforts make a difference.
13
excited about that, they find fun in this separate fantasy
14
context of establishing their team and seeing how it does.
15
The evidence indicates that they
They
They're
And that is the fundamental thing that sets it
16
apart.
These other analogies that the State identifies,
17
even the analogies about multiple bets on a sporting event,
18
pool bets, parlay bets and all these other kinds of binary
19
things about whether somebody gets over or under a
20
threshold, fantasy sports are just orders of magnitude more
21
fully realized than that.
22
performance by players.
23
fantasy roster and competing against somebody else and
24
enjoying that so much so that that competition has really
25
been a kind of engrained, become an engrained piece of
26
American culture over recent years, and that is the essence
They're about incremental
They're about accumulating this
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35
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3
Proceedings
of what makes fantasy sports different, your Honor.
And the State says that it is just sort of a verbal
4
act, a verbal act for us to say that that is somehow
5
different from betting directly, and that, frankly, your
6
Honor, doesn't do justice to this enormous organism of
7
fantasy sports where this formation of teams has become
8
something over which people compete, over which skill makes
9
a difference, over which performance is monitored and over
10
11
which prizes are given.
And if you look at the cases that address fantasy
12
sports they come out the same way.
13
of Humphrey, your Honor, but I encourage you to read
14
Humphrey because I think you won't find it the same way that
15
the State has just described it.
16
to the New Jersey gambling statute.
17
about the New Jersey gambling statute, including the
18
definition of gambling, which in New Jersey is wager, bet or
19
stake, which sounds an awful lot like staking and risking
20
something of value in New York value.
21
words, but it is thematically the same.
22
The State is dismissive
It says it is not directed
It expressly talks
It is not the same
The first thing that the State says about Humphrey
23
is that it wasn't applying New Jersey gambling statute.
24
That is not just correct.
25
26
The second thing it says is, in finding, the
Humphrey Court's language is "the success of a fantasy
mb
36
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Proceedings
2
sports team depends on the participant's skill in selecting
3
players for his or her team," just what I've been saying.
4
And as a result, as a matter of law, fantasy sports are
5
legal.
6
The court wasn't talking dictum.
It was offering
7
an alternative holding.
8
law fantasy sports are legal" that is not mere dictum, your
9
Honor.
10
When a court says "as a matter of
The prize itself, the State has suggested the
11
prizes were bobble headed dolls.
12
significance.
13
included flat-screen TVs.
14
or stakes is, as I say, is virtually identical to the
15
language here.
16
There is nothing of
The court expressly engaged on prizes that
The language of the wagers, bets
And what happened in Humphrey, was the Court agreed
17
with the proposition that I'm advancing here, that fantasy
18
sports are their own separate contests as to which there is
19
skill in the participants, and that skill is what makes the
20
difference, that is where participant's influence the
21
outcome, your Honor.
22
Because even though they can't change, you know,
23
various players in the football field may not be able to
24
effect whether the winds blows in a gust or there is a bad
25
call, the point is that there the players on the field are
26
influencing their outcome, and in the particular contests
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37
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Proceedings
2
that fantasy sports are competitors are engaged in, they too
3
are influencing the outcome because the outcome they are
4
focussed on is the outcome of their contest, and that is
5
pivotally affected by their skill at selecting their roster.
6
They are actually the movers, the marionettiers of
7
that outcome, and the fact that they aren't participating in
8
the underlying sporting event doesn't alter their role as
9
very active participants in this separate contest, which the
10
11
Humphrey Court recognized.
Now, the Third Circuit said exactly the same thing
12
in the NCAA case that we cited in our briefs.
13
court put it, the court says there is, quote, A legal
14
difference between paying fees to participate in fantasy
15
leagues and single game wagering because again of the nature
16
of fantasy sports as separate contests.
17
There, as the
The United States Congress, your Honor, came out
18
the same way in the UIGEA statute, when it expressly carved
19
out fantasy sports.
20
Now it did so again on the recitation that it
21
recognized that fantasy sports contests were separate
22
contests, but it built in some protections to make sure that
23
fantasy sports satisfied the requirements of that
24
separateness from the underlying contests that I identified
25
as one of the points of distinction.
26
required is that you have to diversify your players across
mb
And so what the court
38
1
Proceedings
2
games so there is no dependency on the single player's
3
performance in any particular game, that the prizes have to
4
be predetermined.
5
satisfies.
Those are all criteria that FanDuel
6
Now, the State says those aren't New York law and,
7
of course, we are not citing them to you suggesting they're
8
New York law.
9
in the case of the Congress or the judges of the Third
We are citing them because these legislators
10
Circuit, and the judges in Humphrey listened to the argument
11
that fantasy sports are separate contests all their own and
12
accepted those arguments and made them the basis of their
13
rulings, and that is what we are urging upon the Court
14
today.
15
16
17
Now, for a minute, let me talk about how this
applies to the statute.
As I have said, if you look at the Humphrey case,
18
if you look at the Arizona case, if you look at Nevada case,
19
what the courts there said is that once you determine that
20
this payment of an entry fee in a true contest where there
21
are prizes to the winner and actual skill involved in the
22
contest is just that, so that you have fallen into this
23
definition of the true contests we talked about earlier, and
24
you identified that there is some skill, it is unnecessary
25
thereafter to go through the second part of the analysis
26
about whether there is a game of chance or a controlling of
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39
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Proceedings
2
a contest beyond your -- I'm sorry, the participation in a
3
contest, the outcome is outside of your control.
4
And that is what the State says that Humphrey
5
didn't analyze chance.
6
be able to read it, it is unnecessary for me to do that
7
analysis because I found that this is a true contest.
8
9
What Humphrey said, your Honor will
And that, that same structure applies.
The State
talked about how the statute of New York is applies.
It is
10
the same.
It starts with staking or wagering something of
11
value.
12
they use "bet," they use "stake" in the New Jersey statute.
13
But in all those others cases including Lavin under the New
14
York Court of Appeals before there was a statute, but under
15
the New York Constitution, what they said in the true
16
contest you don't actually have a gamble, that the part that
17
the State concludes on that it is a gamble is actually
18
something that was rejected at the threshold.
19
That is exactly the thing that they use "gamble,"
And so if you are applying the statute, the
20
language of the statute, what that means is you stop there.
21
But even if you don't stop there, Judge, and you get to the
22
second part of the statute where you say, well, it has to be
23
the outcome of an event, it is either a contest of chance or
24
a contingent future event over which the participant has no
25
control.
26
The contest of chance, we've already talked about.
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This is a contest of skill, not a contest of chance.
3
And as for the event over which the participant has
4
no control, the contest, the event that the fantasy sports
5
contestant is engaged in is the contest over who selects the
6
best roster, that is something that over, over the outcome
7
of which the contestant has enormous influence, control or
8
influence is, as I said, ultimately the marionettier.
9
So, so under both pieces -- and both pieces of the
10
statute are an independent reason why fantasy sports don't
11
constitute gambling under 205.
12
Now if I may, Judge, just two additional points.
13
THE COURT:
14
after lunch.
15
to you.
16
We will stop at 1, and you can continue
So if you want to start now or later, it is up
MR. KIERNAN:
Well, if the Court wanted to break
17
now that would be great, and I would just take a few minutes
18
after lunch, if that's okay.
19
How much time do I have?
20
THE COURT:
21
MR. KIERNAN:
22
You still have 35 minutes.
I'll sit down in five minutes, thank
you, Judge.
23
THE COURT:
All right, thank you.
24
Let's break for lunch.
25
See you back at 2 o'clock.
26
(Lunch recess.)
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2
THE COURT:
Let's start.
3
Continue your argument.
4
MR. KIERNAN:
5
While reserving three minutes for rebuttal, I want
Thank you, your Honor.
6
to take my final two minutes to go back to your question,
7
which, as I said, goes to the heart of this case, which is,
8
our fantasy sports contestants differ from participants in
9
competitions, their actually participants in their own
10
competitions whose actions influence the outcome of that
11
contest within the meaning of the statute.
12
Judge, is that fantasy sports players are participants in
13
their own contest.
14
And the answer,
If the statute looks to the outcome that matters
15
as being the one where the prizes are paid, that contest,
16
your Honor, is the fantasy sports contest.
17
participant influence the outcome of that contest with all
18
the efforts that he makes to and all the skill he brings to
19
bear in constructing the fantasy roster?
20
And in that sense, he influences the outcome of future
21
contingent events within the meaning of the statute.
22
he control the all future events?
23
in any contest does.
24
No.
Does the
Of course he does.
Does
But no participant
All the fisherman can do is throw his line out in
25
the place that his skill has taught him is the place to
26
throw the line out.
There is still a role for the fish.
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2
And all the football player can do is play his assigned
3
role.
4
offense and defense and a million other contingencies that
5
arise.
6
There are still 10 other players and then there's
The existence of contingencies doesn't change that
7
that player influences -- which is the word in the
8
statute -- influences the outcome of the contest, of the
9
fantasy sports contest.
10
Does the fantasy sports player influence the
11
outcome of that contest when he studies, as he does, picks
12
his chosen roster and then enters the contest?
13
does.
14
makes his participation in the fantasy sports contest of
15
roster selection not gambling under the statute.
Of course he
Through those choices, and because he does, that
16
Thank you, your Honor.
17
THE COURT:
18
Mr. Boies.
19
MR. BOIES:
Thank you.
May it please the Court, your Honor,
20
I'd like to begin by focusing on the question that the
21
Attorney General raised, which is really central to the
22
defense that they have, which says that fantasy sports,
23
daily fantasy sports, are outside of the control of the
24
participants.
25
26
Now, as the Court knows, they've taken the
position that seasonal sports, lawful seasonal sports, are
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not gambling.
3
They've said that repeatedly.
And, if I could, your Honor, I'd like to hand up a
4
binder of some charts that I'm going to refer to as we go
5
through.
6
THE COURT:
Sure.
7
MR. BOIES:
If you turn to Tab 15, Exhibit 15, we
8
discuss there how daily fantasy sports is no more dependent
9
on a future contingent event, the language that they use and
10
the language from the statute, than our seasonal fantasy
11
sports.
12
They say once the game starts, you can't control
13
what happens.
14
real world game here, if that's true, that's as true for
15
seasonal sports as it is for daily fantasy sports.
16
If that's true, and we're talking about the
So the fact that they concede that seasonal
17
fantasy sports contests that have prizes, have entry fees,
18
are lawful and are not gambling is fatal to their claim
19
here.
20
seasonal sports are lawful, not gambling, but that daily
21
fantasy sports somehow are.
22
They cannot have it both ways.
They cannot have that
And, indeed, if you look at Exhibit 16, you'll see
23
a list of the same skills required in seasonal fantasy
24
sports as are required in daily fantasy sports.
25
look at Exhibit 17, you will see that daily fantasy sports
26
actually requires more skill, not less skill, than seasonal
And if you
44
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fantasy sports.
3
4
In daily, there's no draft.
Every player has an
equal chance of picking their players.
5
In seasonal sports, you've got a draft and where
6
you stand in the draft and what other people have done ahead
7
of you or in other rounds of the draft can affect your
8
ability, that is a matter of chance not under your control.
9
But in daily fantasy sports, every player gets to
10
pick whatever players they want for their roster, they have
11
complete control over them.
12
sharp distinction between any card game, poker or otherwise.
13
Because, in poker, you play the hand that you're dealt.
14
It's true, as they say, you can fold, raise, check, go all
15
in.
16
can't change your cards.
17
chance element.
18
hand.
19
that you have complete control over.
20
Which, again, of course, is a
Those are all different bets.
What you can't do is you
Those cards are random, that's the
In fantasy sports, you don't get dealt a
You get to pick your own team.
And that's something
Now, they say that, once you pick the team, you
21
can't control the real world events that are going on.
22
that is true in any contest that you have.
23
But
For example, if you turn to Exhibit 41, one of the
24
things that we do here is we take a section from the
25
Attorney General's brief at page 20, where they concede that
26
betting on your own horse or paying an entry fee to win a
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1
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2
prize in a race, for the owner of the horse, is not
3
gambling.
4
Belmont Stakes is not gambling, they say.
5
rings, once the gate opens, the owner's got no control over
6
what happens in that race.
7
picked a jockey, but once the gate opens, he's got no
8
control.
9
the extent you're able to change your roster as you go
Thus, paying to enter your own horse in the
But once the bell
The owner has picked a horse,
Just like, once you picked your roster, except to
10
along, you don't have any more control.
11
there actually throwing the pitch, shooting the basket.
12
You're not out
Now, that's true for seasonal sports as well as
13
daily sports, but, more important, that's true in any of
14
these contests, even in a beauty pageant.
15
Once the contestants have walked around and
16
performed and done the other talent exhibitions that they
17
do, it's all up to the judges.
18
over it.
19
the judges are and what the judges' preferences are.
20
have no more control over that final step.
21
mean that they haven't competed in a contest of skill.
22
They've got no more control
It's all up to how the judges rank them and who
They
But that doesn't
And the Attorney General themselves, when they
23
recognize that paying an entry fee to enter your own horse
24
in a race is not gambling, that, by itself, affirms what the
25
Humphrey court ruled, which is the same thing, that paying
26
an entry fee to enter a contest in which you are
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1
2
3
4
5
Proceedings
participating is not gambling.
And, in that connection, I want to go to the
statutory language of Section 225.
And the statutory language there says that you
6
engage in gambling if you stake or risk something of value
7
upon the outcome of a contest.
8
be a contest of chance or it can be an outcome, even if not
9
of chance, of something that you have no influence over.
And the outcome can either
10
But the question is, what is a contest?
11
Now, the New York Attorney General wants to say
12
that the contest is those real world games because those --
13
that's the only, quote, event or events over which the
14
fantasy player does not have control.
15
The problem is, that isn't the contest for which
16
the player has paid an entry fee and that's not the contest
17
for which the prize is awarded.
18
sports, you're getting a prize for what happens in that real
19
world sports contest.
20
sports, you're getting a prize for what happens in your
21
fantasy contest.
22
the players control.
When you're betting on
When you're betting on fantasy
And that fantasy contest is something that
23
Now, how do we know that they control that result?
24
Well, one of the ways to know that is by looking
25
at all of the complex skill questions that have to be taken
26
into account by somebody who is playing one of these games.
47
1
Proceedings
2
And when we get to trial, the Court will hear testimony from
3
people -- and the Court has seen the Jennings affidavit,
4
who's one of the players, that's in evidence before the
5
Court, one of the actual successful players, who talks about
6
how much skill is involved.
7
But even more clearly, your Honor, we know that
8
this is a game that is within the control and influence of
9
the players that they are participating in because of the
10
11
overwhelming statistical results.
Now, the Attorney General, I'm going to come to
12
this at the end when I talk about the fact that we're here
13
for a preliminary injunction, the Attorney General has not
14
put in any evidence, any admissible evidence, showing how
15
much skill is involved or how much chance is involved.
16
haven't attempted to do that.
17
They put in two affidavits by psychologists.
They
And,
18
as we indicate, in these charts, in charts 6 and 7, neither
19
of those psychologists address at all any issue of skill or
20
chance or influence or control.
21
studies, they don't provide any identification of the basis
22
of their opinions.
23
anything to back it up, based on anonymous sources, the
24
circumstances of which we are not told anything about, not
25
even how many people they're talking about.
26
They don't provide any
They're conclusory opinions without
And as we indicate in our Exhibit 5, the only
48
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Proceedings
2
other person is a dean of a business school who's put in an
3
affidavit that, remarkably, again, does not address the
4
central issue in this case, which is, are the players of
5
fantasy sports able to influence the outcome of their
6
contest; are they participants or not?
7
Because the AG, in their brief, has said
8
repeatedly that participants can bet on themselves.
9
Participants can bet on themselves.
10
example.
11
brief.
12
That's their horse race
They give that example a number of times in their
And so the question is, are daily fantasy sports
13
players people who are actually participating in what
14
they're doing?
15
Court's going to hear a lot of testimony if there's a trial,
16
will understand that they are participating intensely, they
17
are looking hard at it.
18
skill-based analysis.
19
the actual dispersion of results.
20
And anybody that's played this, and the
This is, they recognize, a
And the proof is in the statistics,
You've got evidence in front of you in which
21
eminent professors of statistics have done analyses that
22
indicate that the chance and the likelihood that you could
23
have this dispersion of results, other than based on skill,
24
is one in what they call a centillion, which is 1 followed
25
by about 50 zeros.
26
comprehend.
It is smaller than anybody can
It is smaller than we can even conjure up on
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1
Proceedings
2
our electronic calculations.
That's the likelihood that
3
these results could be due to something other than skill.
4
And I come back again to the statutory language.
5
The statutory language says it's gambling if you are going
6
to get something of value based on the outcome of a contest
7
that is either of chance or beyond your control.
8
9
And so what is the contest for which you're
getting a prize?
It's not the sporting event.
There's no
10
prize for any of those sporting events.
11
which you're getting a prize is the daily fantasy sports
12
competition.
13
and over again in the affidavits of Professor Wyner,
14
Professor Rubenfeld, Professor Giulala.
15
The contest for
And that is something that we have shown over
And the MIT professor that Fanduel has submitted
16
show that this is under the control of the fantasy
17
participants and they are actually doing the competition.
18
They are competing against other people who are doing the
19
same thing.
20
When I enter -- not me, but when my son enters,
21
when my son enters a fantasy competition, he isn't competing
22
against the real world players, he's competing against the
23
other fantasy players who are constructing their own
24
rosters.
25
the excitement is about, and that's what the prize is
26
awarded for, and that's what the entry fee is paid for.
And that's what the competition is, that's what
50
1
Proceedings
2
3
So for all of those reasons, there's no likelihood
of success on the merits.
4
I think, if this case continues, the Court's going
5
to hear a summary judgment motion from DraftKings and, I
6
suspect, Fanduel as well.
7
But there's certainly not a likelihood of success
8
on the merits that could justify the extraordinary remedy of
9
a preliminary injunction at this time.
10
Now, there is a second independent reason why the
11
AG's case fails.
12
contest that's not of chance, the outcome of which is under
13
the control of participants, but this is not a wager.
14
is the payment of an entry fee to win a prize.
15
And that is that, not only is this a
This
And the Court heard about the Gibson case, the
16
Nevada Supreme Court case.
Interesting, that case relies on
17
an earlier New York case that made the same point.
18
relies on the Lavin case that both sides have cited to the
19
Court.
20
case.
It
And the Nevada Supreme Court is relying on that
So it's not just the New Jersey court.
21
And I agree with my colleague, we urge you to read
22
that case.
We urge you to read these other cases as well,
23
because they all show that this is an area in which there is
24
consensus that, when you're paying an entry fee to
25
participate in a contest and there's a prize, that's not
26
gambling.
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1
Proceedings
2
And, again, in an indirect way, the AG concedes
3
that when they say that somebody entering their horse in a
4
race is not gambling, even though you pay an entry fee and
5
even though you get a big prize.
6
Now, I want to reserve five minutes for rebuttal
7
and I want to give my colleague, Mr. Mastro, some time to
8
address the Court.
9
But before I do that, I want to remind the Court
10
how we are here.
We are here on two motions for a
11
preliminary injunction.
12
which is to shut us down.
13
about shutting us down outside New York, but shutting us
14
down in New York.
15
New York, that's what they're seeking to do with a
16
preliminary injunction.
One is the motion of the State,
And, yes, they're not talking
They're going to destroy the business in
17
And we talk about, you know, in charts 2 and 3 and
18
4, preliminary injunctions are drastic remedies that require
19
a clear right to it under the law, an undisputed fact.
20
They've got to have a really strong factual showing.
21
particularly true where, as here, they're trying to upend
22
the status quo.
23
That's
Ordinarily, as we point out in our brief and in
24
some of these charts, you try to get a temporary restraining
25
order or a preliminary injunction to preserve the status
26
quo.
Here, they're trying to change the status quo.
And
52
1
Proceedings
2
it's not just the status quo of a year or two.
3
status quo that's gone on for eight years.
4
there's been daily fantasy sports in New York.
5
DraftKings entered four years ago, it had been going on for
6
four years.
7
This is a
For eight years
When
All sorts of large public companies made very
8
large investments based on their analysis of the legality of
9
this kind of activity.
10
anti sports betting, were supportive of fantasy sports.
11
12
Sports leagues, that are notoriously
All of that contributed to, I think, a widespread
recognition that this was all lawful activity.
13
Now, we're not saying that this is the time or the
14
place for us to invoke estoppel or latches.
15
with the Attorney General that you can never do that with
16
the State.
17
is not estoppel and latches.
18
But that's not the issue here.
We disagree
The issue here
The issue here is the fact that you have a
19
long-standing status quo that they're trying to upend with a
20
preliminary injunction and that is not an appropriate use of
21
a preliminary injunction.
22
to shut down a company who has been operating lawfully for
23
four years in a business that's operated lawfully and openly
24
for eight years and to do that without a trial on the
25
merits.
26
It's not an appropriate situation
One of the things we're saying is that, before you
53
1
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2
shut us down, we get our full day in court where you
3
actually listen to evidence.
4
evidence.
5
their assertion of what the facts are.
6
enormous regard for the Attorney General's office, they
7
can't make evidence.
Only precipient witnesses and experts
8
can supply evidence.
And that's what the law requires for a
9
preliminary injunction issue.
And they haven't given you any
They are asking you to make decisions based on
And despite my
It doesn't always require
10
live testimony, but it requires affidavits, declarations by
11
people with knowledge.
12
with anything.
13
And they haven't provided the Court
They've made a number of factual assertions in
14
their argument, but you notice they don't cite anything in
15
the record for any of those factual assertions.
16
17
With that, your Honor, I have -- I will leave only
about three or for minutes for Mr. Mastro.
18
I do want to reserve the balance for rebuttal.
19
THE COURT:
20
MR. MASTRO:
21
22
Okay.
Your Honor, as you know, I can talk
very fast, so let me get right to it.
If I can hand up to the Court, because I want to
23
follow along with something that Mr. Boies just said, which
24
is the dispositive reason for why this case doesn't get out
25
of the box.
26
And one of those reasons, your Honor, that
54
1
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2
Mr. Boies didn't really focus on yet, is an admission by the
3
AG's office that fantasy sports games, traditional ones, are
4
perfectly legal, perfectly legal.
5
games?
Daily fantasy sports
Oh, no good.
6
Now, your Honor, look at pages 15 through 17 of
7
the binder, going through all the reasons why it is
8
essentially the same game and, if anything, it requires more
9
skill to do daily sports, fantasy sports betting.
10
Your Honor, that is pivotal to this case because
11
the admission means that traditional fantasy sports games
12
are fine.
13
money down to participate in such a contest with an entry
14
fee, and you pick your team, and your team is performing on
15
the field, and it's based on the team you pick as kind of a
16
general manager or owner of a team.
17
fine.
18
entire season somehow makes it illegal?
19
doesn't make sense.
And it's played the same way, and you can put
And that's perfectly
But simply doing it on a weekend as opposed to an
20
Your Honor, that
It doesn't make sense at all.
Now, your Honor, I gave you the statute, all
21
right, because she left a few pieces out of the statute, all
22
right.
23
24
Let's talk about the pieces of the statute really
quickly, because I've got another minute and a half.
25
26
Stakes or risks something of value upon the
outcome.
That is a threshold question, your Honor, that, if
55
1
Proceedings
2
they don't get out of that box, they lose automatically.
3
In other words, under New York law, for over a
4
hundred years, entry fee to compete in a contest for a
5
prize.
The law in New York has said that for over a hundred
6
years.
All right?
7
Lawrence -- People Ex Rel. Lawrence v. Fallon.
8
hundred years that's been the law in the state.
9
That's your -- that's your People v.
Over a
And what did she say the difference was?
10
the owner of a horse in the Belmont Stakes.
11
time I looked, the owner isn't riding the horse, the owner
12
isn't the horse.
13
then the team is performing.
14
New York Court of Appeals has said for over a hundred years
15
that is an entry fee, a contest, the predetermined prize.
16
And that, your Honor, that, your Honor, they're
17
Okay.
That's
Last
The owner is putting the team together and
That's perfectly legal because
dead on that basis.
18
Humphrey says the same thing.
19
And let me just be crystal clear.
She reads a few
20
words out.
She says, oh, that was only about the New Jersey
21
qui tam statute.
22
was about a federal case, about a federal law.
23
admit they were wrong.
Now they say it's about the New
24
Jersey qui tam statute.
The qui tam that says, if it's
25
illegal gambling in New Jersey, a private person can bring a
26
qui tam action.
Remember, the other day they told you it
They had to
The illegal gambling is defined under the
56
1
Proceedings
2
New Jersey statute, not just as betting and wages.
3
"betting, wages or stake".
4
That's what New Jersey gambling law says, "stake".
5
what New York law says.
That's what I handed up to you.
6
And, your Honor --
7
MR. BOIES:
8
It says
That's
These are great points, but I'm going
to cut it off.
9
THE COURT:
You're running out of time.
10
MR. MASTRO:
11
Let me add one last point, your Honor, because I
I am your, Honor.
12
know you'll give Mr. Boies the courtesy of a couple of extra
13
minutes, very quickly.
14
THE COURT:
How many?
15
Go ahead.
16
MR. MASTRO:
17
That brings me to the last part of the statute
Thank you, your Honor.
18
that no one talked about.
19
comma, "upon an agreement or understanding that he will
20
receive something of value in the event of a certain
21
outcome."
22
Under "Gambling," after the
There is no certain outcome here.
There is no
23
definable event with a -- definite event with a definite
24
outcome.
25
26
And, your Honor, this is the pivotal point.
If
traditional sports fantasy gaming meets this test, that
57
1
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2
prong of the statute, daily sports fantasy games do.
They
3
say traditional fantasy sports games aren't betting.
People of the State of New York v.
DraftKings, Inc.
71:15
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24:18;29:9
life (1)
21:13
light (1)
14:2
likelihood (6)
6:18;9:14;48:22;
49:2;50:2,7
likely (2)
6:25;17:3
limitations (1)
14:16
limitless (1)
10:16
line (2)
41:24,26
line-up (1)
18:19
lineups (1)
14:10
list (3)
10:14;20:26;43:23
listen (1)
53:3
listened (1)
38:10
literally (1)
18:22
little (2)
5:5;63:26
live (2)
53:10;70:17
logically (1)
28:25
long (4)
12:4;14:15;20:26;
59:25
longer (2)
24:24,24
longitudinal (1)
24:4
long-standing (1)
52:19
look (10)
6:8;29:24;35:11;
38:17,18,18;43:22,25;
54:6;66:18
looked (2)
7:7;55:11
looking (3)
Margaret Baumann