NY Attorney General Eric Schneiderman filed an enforcement action Tuesday morning in New York State Supreme Court in the County of New York, seeking a preliminary injunction against DraftKings and FanDuel.
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Schneiderman said in the DraftKings complaint that almost 90 percent of daily fantasy sports players lost money in 2013 and 2014, citing the company’s data. “As the number of people who have played sports fantasy games has grown exponentially, operators of DraftKings, FanDuel and similar sites have said they host games of skill and therefore shouldn’t fall under gambling laws”.
The industry earned the attention of news organizations and lawmakers this October, when an employee of FanDuel appeared to have used information from the company the win $350,000 on DraftKings.
Yahoo does not comment on legal matters, a spokesperson said. If the courts rule that these sites do constitute gambling, this measure serves as the first step in a constitutional amendment process in granting fantasy sports sites like FanDuel and DraftKings exemptions.
Both suits add, “And its approach is not new: Bookmaking operations in jurisdictions with legal gambling like Nevada have long accepted sports proposition or “prop” bets”.
Schneiderman issued an administrative cease-and-desist order on November 11 following an investigation by his office concluding the two websites are illegal gambling operations. Customers use a budget to fill out lineups before games, hoping they pick a team that will outperform other members of the fantasy sites, the Wall Street Journal reported. The payouts are typically more than $20, but a few have been in six figures. The Attorney General’s suit details alleged violations of law by DraftKings and FanDuel. A lawyer for Draft Kings said the effort to shut down daily fantasy sites in NY is unconstitutional.
Despite voluntarily shutting down in NY, FanDuel’s statement also reiterated innocence: “We maintain, unequivocally, that FanDuel has always complied with state and federal law. We look forward to vindicating our position in court next week”, FanDuel said in a statement.
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DraftKings is at pains to avoid calling its daily fantasy sports contests for cash “gambling”. In fact, several major sports leagues, the National Basketball Association and MLB in particular, have invested stakes in the daily fantasy sports sites, but league representatives argue that the activity should still be regulated to “protect integrity”. Schneiderman says chance “plays a significant role’ in DFS results, be it via “player injury, a slump, a rained out game, even a ball taking a bad hop”.
