The suit, backed by anti-gambling pressure group Stop Predatory Gambling (SPG), argues that DFS is a form of prohibited gambling and can therefore only be permitted through an amendment to the New York Constitution, a view shared by some legal experts.
The suit claims that DFS has been misrepresented as a game of skill, noting that players are reliant on elements of chance.
"We believe in improving the lives of the people of New York," SPG national director Les Bernal said. "Daily fantasy sports gambling is a huge rip-off for all citizens, regardless whether you gamble or not."
The money for the lawsuit was raised by the SPG from individual supporters and citizen groups.
Signed into law by Cuomo in August, the DFS law requires companies to apply for a licence and ensure that consumer protection controls and player safeguards are in place.
Operators are required to pay a 15 per cent tax on gross gaming revenue, and a licence fee of between $5,000 and $100,000. This is expected to raise around $4m in tax to fund education programmes in the state.
Five companies, FanDuel, DraftKings, Yahoo, FantasyDraft and Draft (PlayDraft), have already received permits to offer their contests in the state.
However, the lawsuit filed by law firm O'Connell and Aronowitz alleges that this legislation should never have been passed into law. It argues that the matter should have been treated in the same way as any other gambling case, such as the constitutional amendment required to allow seven new land-based casino licences in the state in 2012 and 2013.
To change the state constitution, legislation must pass votes in two legislative sessions followed by a statewide referendum.
"The plaintiffs seek to protect the public from predatory gambling consistent with the Constitution," Attorney Neil Murray of O’Connell and Aronowitz said. "They also intend to stop FanDuel, DraftKings and other internet gambling operators from exploiting the financially desperate and the addicted in New York."
The suit aims to have DFS declared unconstitutional and prevent the New York Gaming Commission from enacting the law. The suit also seeks to have all plaintiffs’ costs reimbursed by the state.
The legal challenge will be defended by New York Attorney General Eric Schneiderman, who had originally issued injunctions against FanDuel and DraftKings for offering illegal gambling in the state. However, since the passage of DFS legislation, he accepted that DFS is a game of skill.