The New York State Constitution §9, mostly reprinted below, tightly restricts gambling. The definition, as written by the legislature, is also reprinted below.

DraftKings and FanDuel ask players to predict the sum performance of various statistics of professional athletes, with potential to win even large amounts of money in (mostly) pay-to-play arrangements. Like John Oliver, the NY Attorney General appears to be of the opinion that this constitutes illegal gambling.

Wall St. trading is also often compared to gambling, and there are plenty of firms completely based on trying to predict the supposedly-random movement of numbers. Valuations of companies are supposedly based in part on performance metrics, the predictability of which are at least somewhat comparable to performance statistics of professional athletes. (Those with special inside information on the statistics aren't allowed to trade on it, under insider trading rules).

If I bet that <insert team here> would win their next contest, how different is that from betting that Apple will win its next patent dispute, or that Home Depot will beat expectations this quarter, that the price of oil will go up, that some particular derivatives spread will converge in a certain way, or any of the many other things I could bet on in the stock market?

How is betting on the aggregation of certain statistics about the future performance of professional athletes so different from betting on the aggregation of certain statistics about the future performance of professional business or fund managers?

In a market where a "a blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by experts," but where most daily fantasy sports winnings go to a small percentage of players who carefully select their teams based on lots of information,* why is the latter considered less a game of skill than the former?

Especially if the daily fantasy sports sites are illegal gambling prohibited under the state constitution, how are Wall St. activities all permitted by these restrictions in the state constitution?

New York State Constitution §9, emphasis added. (1) contains the primary restrictions. (2) is an exception, reprinted here only to show that it doesn't seem to answer the question.

  1. ... [E]xcept as hereinafter provided, no lottery or the sale of lottery tickets, pool-selling, book-making, or any other kind of gambling, except lotteries operated by the state and the sale of lottery tickets in connection therewith as may be authorized and prescribed by the legislature , the net proceeds of which shall be applied exclusively to or in aid or support of education in this state as the legislature may prescribe, and except pari-mutual betting on horse races as may be prescribed by the legislature and from which the state shall derive a reasonable revenue for the support of government, shall hereafter be authorized or allowed within this state; and the legislature shall pass appropriate laws to prevent offenses against any of the provisions of this section.

  2. Notwithstanding the foregoing provisions of this section, any city, town or village within the state may by an approving vote of the majority of the qualified electors in such municipality voting on a proposition therefor submitted at a general or special election authorize, subject to state legislative supervision and control, the conduct of one or both of the following categories of games of chance commonly known as: (a) bingo or lotto, in which prizes are awarded on the basis of designated numbers or symbols on a card conforming to numbers or symbols selected at random; (b) games in which prizes are awarded on the basis of a winning number or numbers, color or colors, or symbol or symbols determined by chance from among those previously selected or played, whether determined as the result of the spinning of a wheel, a drawing or otherwise by chance. If authorized, such games shall be subject to the following restrictions, among others which may be prescribed by the legislature: (1) only bona fide religious, charitable or non-profit organizations of veterans, volunteer firefighter and similar non-profit organizations shall be permitted to conduct such games; (2) the entire net proceeds of any game shall be exclusively devoted to the lawful purposes of such organizations; (3) no person except a bona fide member of any such organization shall participate in the management or operation of such game; and (4) no person shall receive any remuneration for participating in the management or operation of any such game. Unless otherwise provided by law, no single prize shall exceed two hundred fifty dollars, nor shall any series of prizes on one occasion aggregate more than one thousand dollars. The legislature shall pass appropriate laws to effectuate the purposes of this subdivision, ensure that such games are rigidly regulated to prevent commercialized gambling, prevent participation by criminal and other undesirable elements and the diversion of funds from the purposes authorized hereunder and establish a method by which a municipality which has authorized such games may rescind or revoke such authorization. Unless permitted by the legislature, no municipality shall have the power to pass local laws or ordinances relating to such games. Nothing in this section shall prevent the legislature from passing laws more restrictive than any of the provisions of this section. (Amendment approved by vote of the people November 7, 1939; further amended by vote of the people November 5, 1957; November 8, 1966; November 4, 1975; November 6, 1984; November 6, 2001.)

In apparent support of the last clause of §9.1 above,
NY Penal Law §225.00 sets the following definitions:

  1. "Contest of chance" means any contest, game, gaming scheme or gaming device in which the outcome depends in a material degree upon an element of chance, notwithstanding that skill of the contestants may also be a factor therein.
  2. "Gambling." A person engages in gambling when he stakes or risks something of value upon the outcome of a contest of chance or a future contingent event not under his control or influence, upon an agreement or understanding that he will receive something of value in the event of a certain outcome.
  3. "Something of value" means any money or property, any token, object or article exchangeable for money or property, or any form of credit or promise directly or indirectly contemplating transfer of money or property or of any interest therein, or involving extension of a service, entertainment or a privilege of playing at a game or scheme without charge.
  4. "Bookmaking" means advancing gambling activity by unlawfully accepting bets from members of the public as a business, rather than in a casual or personal fashion, upon the outcomes of future contingent events.
  5. "Lottery" means an unlawful gambling scheme in which (a) the players pay or agree to pay something of value for chances, represented and differentiated by numbers or by combinations of numbers or by some other media, one or more of which chances are to be designated the winning ones; and (b) the winning chances are to be determined by a drawing or by some other method based upon the element of chance; and (c) the holders of the winning chances are to receive something of value provided, however, that in no event shall the provisions of this subdivision be construed to include a raffle as such term is defined in subdivision three-b of section one hundred eighty-six of the general municipal law.
  6. "Policy" or "the numbers game" means a form of lottery in which the winning chances or plays are not determined upon the basis of a drawing or other act on the part of persons conducting or connected with the scheme, but upon the basis of the outcome or outcomes of a future contingent event or events otherwise unrelated to the particular scheme.
  7. "Unlawful" means not specifically authorized by law.

(*): The Attorney General of NY seems to point out that daily fantasy games involve a significant degree of skill, in claiming as part (f) of their cease-and-desist letter to DraftKings, that the site misrepresents the degree of skill involved in advertisements about the likelihood that an ordinary player will win a jackpot. John Oliver makes the same point at greater length here.

  • 3
    The obvious answer is that, despite comparisons to gambling, market trading is not gambling under the law, even if speculative in nature. Nobody is awarding a "prize" to the successful trader, for example.
    – phoog
    Commented Dec 8, 2015 at 22:50
  • 2
    Even if you "bet" Apple will win a patent dispute or Home Depot beats expectations, no entity is paying you for the event. You are selling equity in a company to another individual who evaluates the new value to be correct.
    – user662852
    Commented Dec 9, 2015 at 0:15
  • If I placed a bet that the price of X (e.g. a commodity or company) will go up (or down), and it does, I would (presumably) get paid for that.
    – WBT
    Commented Dec 9, 2015 at 0:57
  • 3
    @WBT, if you go to a bookie and place a bet that Apple will have a higher price on a specific date, that's placing a bet. If you purchase equity in Apple on one day, and the next day (or an hour later) sell equity in Apple to a different entity for more money than you paid, that's not "placing a bet" anywhere other than in your own motivation. You enjoy the equity including certain rights (e.g. dividends and voting); you have control of the duration and the decision to not sell the equity. If you believe this is materially the same as "placing a bet", please explain in the question.
    – user662852
    Commented Dec 9, 2015 at 17:38
  • 1
    Is an option a "lottery", "book-making", "pool-selling" or a "game of chance with a prize"? I see puts and calls as a contract (a standard contract at that, defined by a regulated exchange such as CBOE) with fair consideration for a deferred right to execute an equity transaction at a previously agreed price. What's the exact derivative that pays a prize if "Apple will win it's next patent dispute" or "Home Depot will beat expectations this quarter"? You're asking to prove a negative with slippery/unstated definitions.
    – user662852
    Commented Dec 9, 2015 at 22:06

1 Answer 1


The stock exchange deals in two broad types of things: shares in companies (or other organisations) and derivatives.

The first is easy to deal with: buying and selling shares is not gambling - ownership of part of the company passes from seller to buyer. The value that they agree on represents their valuation of the company at the time of the trade; into this will factor all sorts of things that are speculative and ill-defined. However, this is no different from people agreeing on the price of a block of land, a ship or a prize bull - each party evaluates their expected future income stream and decides if they will agree to that price.

Derivative trade, however, can be shown to be financially identical to gambling. However, just because things are identical in one field (finance) does not make them identical in another (law). Derivative trade is legal; gambling isn't. Why? Because derivative trade is not legally a subset of gambling.

  • 5
    It is of course entirely possible that a court could rule that derivatives are in fact covered by gambling law; it may be that this has never been tested in court.
    – phoog
    Commented Dec 9, 2015 at 7:47
  • 1
    @nomenagentis In the sense that they are, in some ways, identical to gambling. I am just trying to say that any assertion that something is or isn't under the law is subject to judicial rulings; these can be based on novel reasoning, and this answer asserts that derivative trading is not legally gambling without citing any authorities or offering any analysis. What guarantee can anyone give that a court won't rule that derivatives' being financially identical to gambling makes them, for the purpose of the law, actual gambling?
    – phoog
    Commented Dec 9, 2015 at 16:48
  • 3
    @DaleM Good start to an answer. I think the question really tries to get at the why behind your last and third-to-last statements. If these two are identical in finance, as you say, why are they so different in law?
    – WBT
    Commented Dec 9, 2015 at 21:03
  • Can you explain how derivatives trading is not legally a subset of gambling? Based on the laws quoted in the question it clearly is. The only way I can see for it not to be is for some supercedent law(s) to assert something to the contrary.
    – feetwet
    Commented May 11, 2016 at 21:20
  • 2
    Federal securities law was changed to allow various derivatives not to be gambling - I believe it started when exchanges wanted to start doing cash-settled futures like index futures. Looking for a ref.
    – dsolimano
    Commented Jul 28, 2017 at 16:00

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