We are suspending negotiations, effective immediately, because to do so otherwise would reduce our moral standing and the long-term Senate Democratic commitment to reform and to change.  We believe that ultimately, we must do what is right for the people of the State of New York. Furthermore, real reform cannot and should not ever include limiting the civil rights of any New Yorkers. Those issues must be part of the legislative process.

                        -- NY State Senate Democratic Leader Malcolm A. Smith

From Newsday:

ALBANY, N.Y. - Senate Democratic leader Malcolm Smith said Wednesday any deal with three dissidents to secure his party's hold on the chamber majority is officially off.

Smith said he has the support of the Democratic Caucus and has ceased negotiations with the three, Sen. Ruben Diaz Sr. and Sen.-elect Pedro Espada Jr., both of the Bronx, and Sen. Carl Kruger of Brooklyn. Their support would give the party a 32-30 majority beginning Jan. 1 after decades of Republican control.

"We're prepared to wait if we have to to come into the majority," Smith said. He was flanked by senators Neil Breslin of Albany and Liz Krueger of Manhattan when he made the announcement.

Smith said the three renegades were motivated by "personal interests." He also said he wouldn't subject civil rights issues to negotiation, referring to a proposal backed by many Democrats to legalize gay marriage.

I've read more reports and looks like what was happening was three senators holding the Democratic majority hostage for their own interests, and in the process, not just obstructing the potential for marriage equality, but an entire progressive agenda which has been blocked for years by a Republican-controlled New York Senate. Even if this means the Democrats lose the majority they won in last month's election, it was the so-called "Gang of Three" who were really trying to thwart the will of New York voters.