After an inquiry into daily fantasy sports, the attorney general of the state of New York, Eric Schneiderman, has informed the two largest daily fantasy sports sites that they must halt operations in the state.
In an initial response to the news, DraftKings and FanDuel are holding their ground, maintaining that daily fantasy sports is a game of skill and are legal under the UIGEA. Initial reports suggest that the sites will continue to operate in the state. The move is the latest in the series of events that have put pressure on the fast growing daily fantasy sports industry over the last few weeks.
AG Says DFS Sites are “Illegal Gambling” in the State
In a statement released to the New York Times, Schneiderman issued a harsh criticism of the business model and industry that DraftKings and FanDuel lead. “It is clear that DraftKings and FanDuel are the leaders of a massive, multibillion-dollar scheme intended to evade the law and fleece sports fans across the country. Today we have sent a clear message: not in New York, and not on my watch.” They added, “our review concludes that DraftKings’/FanDuel’s operations constitute illegal gambling under New York law.”
DrafKings spokeswoman Sabrina Macias says that DraftKings New York players total 500,000, nearly 1/16th of the state’s 8.4 million population. DraftKings are encouraging affected players to contact the attorney general and stand up for player rights.
In the meantime they stated that they “strongly disagree with the reasoning [of Schneiderman’s opinion] and will examine and vigorously pursue all legal options available.” Both sites appear as though they will continue to offer services to New York players, which are estimated to be around 10% of each site’s total customer base. It is worth noting that FanDuel’s headquarters are locating in the state of New York, perhaps potentially further complicating matters.
States have increasingly scrutinized dfs sites since an “insider” scandal broke that shed light on the unregulated industry. While many states are still on the sidelines, others such as Florida have introduced legislation regulated the game. A dozen or so more are considering legislation.
Here is an ESPN report of Tuesday night’s news:
Statements Released by FanDuel and DraftKings
DraftKings released the following statement in response to the New York attorney general’s decision, posted on Playbook:
We are very disappointed that New York Attorney General Eric Schneiderman took such hasty action today, particularly since he did not take any time to understand our business or why daily fantasy sports are clearly a game of skill. We strongly disagree with the reasoning in his opinion and will examine and vigorously pursue all legal options available to ensure our over half a million customers in New York State can continue to play the fantasy sports games they love.
We continue to see a number of other officials, including Senator Negron in Florida, Representative Zalewski in Illinois and the Federal Trade Commission, take a reasoned, informed and measured approach to the daily fantasy sports business. We hope this trend continues along with due consideration for over 56 million sports fans across the country who enjoy playing fantasy sports. We remain committed to working with all relevant authorities to ensure that our industry operates in a manner that is transparent and fair for all consumers.
New York’s actions today are an unfortunate example of a state government stifling innovation, technology and entrepreneurship and acting without full and fair consideration of the interests of consumers.
FanDuel also released a statement, which was posted on the site’s Newsroom webpage:
“Fantasy sports is a game of skill and legal under New York State law. This is a politician telling hundreds of thousands of New Yorkers they are not allowed to play a game they love and share with friends, family, coworkers and players across the country. The game has been played — legally — in New York for years and years, but after the Attorney General realized he could now get himself some press coverage, he decided a game that has been around for a long, long time is suddenly now not legal. We have operated openly and lawfully in New York for several years. The only thing that changed today is the Attorney General’s mind.”