A NY state judge on Friday granted a request from the NY attorney general to temporarily shutter DraftKings and FanDuel in the state, handing a devastating blow to the fast-growing but controversial daily fantasy sports industry.
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Justice Manuel Mendez, who sided with New York Attorney General Schneiderman today and granted an injunction against DraftKings and FanDuel.
In a statement, Schneiderman praised the decision, saying it was “consistent with our view that DraftKings and FanDuel are operating illegal gambling operations in clear violation of NY law”. His office sued the companies in state court to force them to stop.
The new ruling will allow the websites to continue operating until at least January 4 while the courts determine whether they are illegal gambling operations or games of skill. “This immediate stay was granted, so we will remain fully operational in NY”, said David Boies, counsel for DraftKings in a statement.
There is a gray area when it comes to daily fantasy sites. The NFL does not own equity in either daily fantasy operator, but nearly all the league’s teams have advertising partnerships with one of them. NY has long prohibited betting on games of “chance”, including sporting events (except for horseracing), but allows gambling on games of skill.
The UIGEA language exempting fantasy sports has no corresponding authority under New York State law as now written, he said.
The same order turns aside motions filed by DraftKings and FanDuel that would have enjoined Schneiderman’s office from taking enforcement action against them.
Both companies are expected to appeal the decision because it is definitely not the last word so far as the daily fantasy sport business is concerned.
Judge Mendez held that the attorney general had established a likelihood of success on the merits and thus granted the injunction “enjoining and restraining DraftKings Inc”.
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At the heart of the furor is the companies’ business plan: Customer pay an entry fee and can win cash based on the performance of actual players in games that take place that day or week. FanDuel didn’t immediately comment on Mendez’s decision. The ruling indicates that Mendez believes that Schneiderman is more likely to prevail on the merits of the case than DraftKings and FanDuel.
