USA TODAY International Edition
New York declares daily fantasy illegal
The attorney general of New York has classified daily fantasy sports as illegal gambling and has ordered FanDuel and DraftKings to stop accepting wagers there in the latest crushing blow to both companies.
The decision comes after the attorney general, Eric Schneiderman, opened an investigation into the companies last month. His office issued cease- and- desist letters to their chief executives Tuesday, dramatically intensifying the crisis this industry faces after years of flying under the radar without regulation.
“Our investigation has found that, unlike traditional fantasy sports, daily fantasy sports companies are engaged in illegal gambling under New York law, causing the same kinds of social and economic harms as other forms of illegal gambling and misleading New York consumers,” Schneiderman said in a statement. “Daily fantasy sports is neither victimless nor harmless, and 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.”
It’s not clear how the decision will immediately affect FanDuel, which is based in New York City. In addition to the legal threat posed by this decision, it also makes things increasingly awkward for the sports leagues that have stakes in these companies as equity investors. For example, the NBA has a stake in FanDuel and also is headquartered in New York. Major League Baseball, also headquartered in New York, has a stake in DraftKings.
FanDuel released a statement Tuesday in response.
“Fantasy sports is a game of skill and legal under New York state law,” it said. “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, co- workers 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.”
DraftKings, based in Boston, also responded with a statement.
“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.”
A spokesman for the attorney general’s office disputed this, saying his office met with DraftKings officials Oct. 9 and other times.
The companies could fight the attorney general in court. In the meantime, their businesses are under increased risk as prosecutors and other officials question whether this industry offers just another form of sports gambling, which is largely illegal outside of Nevada.
Schneiderman’s office made a distinction between daily fantasy and traditional fantasy in the letters sent to the companies.
“Unlike traditional fantasy sports, ( daily fantasy) is designed for instant gratification, stressing easy game play and no long- term strategy,” the letters said. “For these and other reasons, ( daily fantasy) functions in significantly different ways from sites that host traditional fantasy sports.”