On Tuesday, top DFS sites DraftKings and FanDuel announced that they would halt their real money New York operations immediately. Shortly after FanDuel and DraftKings made their announcement, Yahoo announced that they would also be halting operations in the state on Wednesday.
The move came as the result of a settlement between DraftKings and FanDuel. The settlement will not directly affect players playing DFS in other states outside of New York, although traffic and prize pools will likely take a hit due to the fact New York is one of the largest states in the U.S.
Terms of the Settlement
In exchange for leaving New York, the Attorney General will suspend their pursuit of litigation until September that would require FanDuel and DraftKings to compensate players who lost money from gameplay on the site. An appeals hearing will be held that month to determine whether DraftKings or FanDuel is responsible for paying restitution to players.
Other conditions of the settlement include an agreement that both parties will drop their lawsuits if regulation happens before June 30th, the end of the New York legislative session. If legislation is not passed and if the Attorney General wins the September appeal, all current and future lawsuits will be thrown out. In addition, both FanDuel and DraftKings must process withdrawals of New York within 7 days of a withdrawal request.
The Past and What Lies Ahead
The trouble in New York came in the wake of a data leak scandal . The Attorney General, which sent a cease and desist letter to DraftKings and FanDuel in November, said he believed that DFS met the definition of gambling and as a result, not lawful under current New York law.
A major hope for the industry and for players in New York lies in pending state legislation that would regulate daily fantasy sports, much like Virginia did earlier this month. There are a few bills floating around but a bill sponsored by Sen. John Bonacic, appears to be the bill with the most traction. The 2016 New York State legislative session ends at the end of June.
That bill would require operators to pay a one-time fee of $500,000, an amount that will severely limit the ability of most operators to continue operations in the state. Operators will also be taxed 15% on gross revenue and will not be allowed to offer contests on college sports or horse racing.
Statements from DFS Operators
The following statements were issued by top operators after the news of the New York agreement. It is also believed many, if not all, other daily fantasy sports sites will allow suit.
We are an industry leader in technology, innovation and consumer protections, and we are grateful to the hundreds of thousands of New Yorkers who have enjoyed playing fantasy sports on DraftKings for the last four years,” it read. “We will continue to work with state lawmakers to enact fantasy sports legislation so that New Yorkers can play the fantasy games they love.
New York is a critical state for FanDuel. FanDuel is headquartered in Manhattan, where we employ more than 170 young, smart, passionate fans who are committed to innovating and providing the best fantasy experience possible. We are proud to be one of New York’s largest startup companies, and while it is disheartening for us to restrict access to paid contests in our home state, we believe this is in the best interest of our company, the fantasy industry and our players while we continue to pursue legal clarity in New York.
Due to recent developments concerning paid Daily Fantasy Sports (DFS) in New York state, Yahoo will suspend offering paid DFS contests to residents of New York beginning Wednesday, March 23, pending further review,” a company spokesperson said in a statement. “Yahoo believes that its contests are lawful and we will continue to assess the legal environment for DFS while providing a compelling fantasy sports experience for all of our users. Our decision today does not impact users in other states.