As a state-to-state battle for the future of daily fantasy sports continues, a New York Supreme Court Justice dealt the industry a critical setback Friday morning when he granted New York attorney general Eric Schneiderman’s preliminary injunction to halt industry leaders FanDuel and DraftKings from operating in the state.
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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.
The two daily fantasy sports (DFS) superpowers are under intense scrutiny in other states, which have moved to declare the games illegal betting. With the ruling, the two companies have 30 days to exit the state and are no longer authorized to offer DFS contests in NY until the case is settled or Judge Mendez’s decision is overturned on appeal.
Furthermore, if the injunction is not overturned on appeal, the sites will not be able to return to NY until the actual court case is settled.
Hours later, appellate judge Paul Feinman – hearing an emergency challenge to the ruling – said the companies could keep doing business in the state for now.
“So-called Daily Fantasy Sports (‘DFS’) wagers fit squarely in both these definitions”, Schneiderman’s memorandum reads, “though by meeting just one of the two definitions DFS would be considered gambling”. FanDuel and Draftkings may continue their business on a nationwide scale but must cease all operations in NY for the time being.
“Today’s preliminary decision was wrong and we expect we will ultimately be successful”, FanDuel said in a statement. An attorney for DraftKings said the company believes the “status quo should be maintained while the litigation plays out”.
The issue goes beyond both companies and the thousands of people who play within NY every day – it also involved the sports leagues themselves, some of whom own an equity stake in these companies. “So [daily fantasy is] pretty different, I think, from sports books where even though there is some advantage that can be had, the edges are so minimal that it is primarily chance-based”.
This ruling was a major blow to the sites: 12.8 percent of all daily fantasy sports players live in NY, according to stats from Eilers Research cited by multiple outlets.
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The ruling specifically highlighted New York Penal Law section 225.00[1], which defines “Contest of Chance” to mean “any contest, game, gaming scheme, or gaming device in which the outcome depends in a material degree upon an element of chance, notwithstanding that skill of the contestants may also be a factor therein”.
