Schneiderman, in a letter to DraftKings and FanDuel on Tuesday, declared that the two daily fantasy sports sites were running an illegal gambling operation.
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Mr. Schneiderman began his investigation of the sites after a DraftKings employee released internal betting data and that same week won $350,000 on the rival site, FanDuel, which is based in NY.
The operations of Boston-based DraftKings and New York-based FanDuel rely on an exemption in a 2006 federal law that banned online poker but allowed fantasy sports, which were categorized as games of skill and not chance, and therefore don’t fall under the purview of gambling laws. Citing New York law, Schneiderman told the companies that each wager placed with them “represents a wager on a “contest of chance” where winning or losing depends on numerous elements of chance to a ‘material degree.'” Similarly, the New York Times reported that, if challenged in court, the state of New York would have to prove chance to be a material factor.
The companies have five days to try to persuade Schneiderman that their operations are lawful. DraftKings said in an emailed statement that the attorney general “did not take any time to understand our business or why daily fantasy sports are clearly a game of skill”.
Zwillinger, a former U.S. Justice Department official and touted as a “foremost expert on internet security law”, called Schneiderman’s legal analysis was flawed. A spokeswoman, Susan Newer, said that was so obvious that the commission never even had to meet to discuss it. We all just sort of knew, she said.
Both fantasy companies argued that the attorney general doesn’t have the authority to unilaterally prevent New Yorkers from playing fantasy sports. The federal prosecutor in Tampa has reportedly convened a grand jury to review the legality of the games.
In this October 25, 2015, photo, workers set up a DraftKings promotions tent in the parking lot of Gillette Stadium, in Foxborough, Mass., before an NFL football game between the New England Patriots and NY Jets. Traditional fantasy sports leagues stretched over a sport’s entire season.
“It’s simply wrong, given that federal law is clear that the games of skill are in fact legal”, says Collins.
Four other US states ban all fantasy sports, including seasonal games run by ESPN, CBS and Yahoo. “And before legislatures or AGs or a governor just says ‘no you can’t play here, ‘ there should be more determination of what it is”. It promised to pursue this fight “to the fullest to ensure that NY fantasy sports fans do not need to stop playing the games they love”.
Industry leaders FanDuel and DraftKings have investment deals or partnerships with the National Basketball Association, MLB, NHL, MLS and NASCAR and promotional agreements with 15 NFL teams on in-stadium signage and radio and digital advertising.
The event’s lineup includes the premiere of “Perfect Lineup”, a documentary about daily fantasy sports.
Coakley said the NY Attorney General’s decision would have a “huge impact” on the industry. Last month, the state of Nevada ruled that daily fantasy sports are indeed gambling, so site operators must apply for gaming licenses.
“I’m not an expert on this topic”, he said.
Schneiderman’s cease-and-desist letters to the nation’s two biggest online fantasy-sports-betting Web sites – FanDuel and DraftKings – sparked a deluge of outrage within hours.
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“I don’t see that recent develops have made any change to that”, he said. DraftKings and FanDuel are now operating in more than 40 states.
