DraftKings wins reprieve to stay in play in NY
By Associated Press | December 11, 2015, 14:00 EST
NEW YORK (AP) — Daily fantasy sports giants DraftKings and FanDuel took a hit Friday in their fight to stay in business in New York, but a scramble to an appeals court kept DraftKings in play at least through the end of the NFL regular season.
FanDuel, meanwhile, had already suspended play from New York amid the sites’ clash with state Attorney General Eric Schneiderman over whether daily fantasy sports amounts to illegal gambling. The company is based in New York.
Friday morning, Manhattan state Supreme Court Justice Manuel Mendez temporarily barred both sites from taking play from one of their biggest customer bases, until “a final determination” of the court dispute.
But Boston-based DraftKings and FanDuel quickly appealed. By Friday afternoon, a Supreme Court Appellate Division judge said the companies could continue operating into January, until a full panel of judges decides whether the companies can keep going while the appeals process unfolds. That could take well into January.
The legal maneuvering in Manhattan came as states around the country grapple with whether and how to regulate the growing industry. The dispute between the nation’s two biggest daily fantasy sports sites and Schneiderman reflects debate nationwide about whether online wagering on daily fantasy sports contests is a game of chance and thus illegal or a game of skill.
Earlier, Nevada gaming authorities banned both companies, saying they were offering illegal gambling opportunities. Both DraftKings and FanDuel have said they have hundreds of thousands of customers in New York. Schneiderman’s office has estimated the two companies account for 90 to 95 percent of the daily fantasy sports market.
Participants in fantasy sports contests generally create a virtual team using the names of real players and compete against each other with the results based on the on-field or ice performance of the players listed on their rosters. So knowledge of the players in a given sport is important in determining outcomes, but so are unpredictable factors such as injuries, poor officiating and weather.
DraftKings and FanDuel argue their contests are highly competitive games of skill, not gambling. Schneiderman has said that while the games can involve some skill, that doesn’t make them legal, since the outcome ultimately depends on events out of customer control, such as athletes’ injuries, weather or even blown calls by referees and umpires.
Both DraftKings and FanDuel said they would ultimately prevail in their dispute, which is reflecting debate nationwide about whether playing fantasy sports is betting.
“We look forward to a full and fair hearing and are confident we will demonstrate clearly to the court why we should be able to continue to offer our DFS (daily fantasy sports) games in New York permanently,” DraftKings lawyer David Boies said in a statement. FanDuel said it would “work to bring our product back to sports fans around the state through our appeal and working with the legislature to enact sensible regulations for fantasy sports.”
Schneiderman spokesman Damien LaVera, meanwhile, said the attorney general was eager to show appeals judges why they should uphold Mendez’ ruling.
Mendez didn’t make a final declaration on whether the sites are illegal gambling operations. But “the protection of the general public outweighs any potential loss of business” while the case plays out, he wrote.
“The payment of an ‘entry fee’ as high as $10,600 on one or more contests daily could certainly be deemed risking ‘something of value “‘— part of the legal definition of gambling in New York, he wrote.
Both DraftKings and FanDuel have said they have hundreds of thousands of customers in New York, and Schneiderman’s office has estimated the two companies account for 90 to 95 percent of the daily fantasy sports market.
The case only directly mentions them, and it’s not immediately clear how the ruling might affect other companies in the industry. Schneiderman’s office declined to comment on that question but also has subpoenaed information from Yahoo, which also offers daily fantasy sports in New York. Yahoo has said it believes it’s offering a “lawful product.”
Most states have no laws that specifically address fantasy sports but do have gambling laws that might dictate whether they’re legal.
In Washington, the gambling commission specifically concluded that fantasy sports wagering is illegal. Massachusetts lawmakers are considering regulations, while regulators in Nevada have restricted daily fantasy sports to existing casinos.
In New York, State Assembly Racing and Wagering Committee Chairman J. Gary Pretlow predicted this week that the state will ultimately legalize and regulate daily fantasy sports, regardless how the court fight turns out. The state already has legalized some forms of gambling, including lotteries, betting on horse racing, video slot machines at racetracks and a number of forthcoming casinos.
Pretlow said Friday that lawmakers must await further court rulings before determining whether the Legislature could legalize daily fantasy sports by changing the penal code, or whether it would require a state constitutional amendment.
Written by Jake Pearson and Jennifer Peltz