For FanDuel, this means re-entering NY after pulling all business there in mid-November despite the fact that its headquarters are right in the city.
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Early Friday, a judge ordered the companies to stop operating in NY state, handing a victory to Attorney General Eric Schneiderman.
FanDuel shut down its NY operations last month. DraftKings and FanDuel argue that daily fantasy sports are games of skill, which are permitted under state law. Arguments were heard last month on whether the daily sports games were the same thing as illegal games of chance or if they were lawful games involving skill.
Mendez noted in the order that the sites were still allowed to operate in other states where allowed.
Daniel Wallach, a sports and gaming attorney with the firm of Becker and Poliakoff in Florida, was skeptical that the companies will be allowed to stay in NY in the short-term, noting that it has among the strictest gambling laws in the country.
The appellate court’s stay does not negate the decision made by Judge Manuel Mendez, who ruled fewer than six hours prior that daily fantasy constituted illegal gambling under NY state law.
With daily fantasy operations clinging to only a tenuous grasp in New York, California could quickly become the industry’s most critical state, given its similarly large user base. However, the significance of losing the NY market can not be overstated, and would be much more likely to lead to a domino effect in a number of other states still allowing participation in DFS competitions. FanDuel said earlier that it gets about 10% of its business from NY residents. Customers from the following states are now ineligible to participate on FanDuel: “Arizona, Iowa, Louisiana, Montana, Nevada, New York or Washington”.
Boies continued: “Daily Fantasy Sports contests have been played legally by New Yorkers for the past seven years and we believe this status quo should be maintained while the litigation plays out”. “I have said from the beginning that my job is to enforce the law, and that is what happened today”. Lawyers for DraftKings and FanDuel argued that their clients could not have violated gambling statutes because they were taking in entry fees and not wagers.
David Boies, attorney for DraftKings, said in a statement that his client is ready to continue its fight. 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”.
FanDuel and DraftKings immediately appealed the decision to the New York Supreme Court Appellate Division. But in his decision, the judge says that Schneiderman has a better chance of winning than the fantasy sites do.
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Schneiderman spokesman Damien LaVera, meanwhile, said the attorney general was eager to show appeals judges why they should uphold Mendez’ ruling.
