Mendez granted preliminary injunctions sought by state Attorney General Eric Schneiderman, ruling that daily fantasy sports, or DFS, contests offered by DraftKings Inc. and FanDuel Inc. are likely illegal forms of gambling under NY law.
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New Yorkers will be able to play daily fantasy sports until next month after a state appeals court granted an emergency request to keep the mega-popular sites open, postponing a lower court ruling that said DraftKings and FanDuel had to cease operations in the Empire State. “This immediate stay was granted, so we will remain fully operational in NY”, said David Boies, counsel for DraftKings in a statement. “The balancing of the equities are in favor of the NYAG and the State of NY due to their interest in protecting the public, particularly those with gambling addictions”.
Mendez also highlighted that in order for a preliminary injunction to be granted, a likelihood of success warranting the injunction should be found, ruling that the Attorney General was most likely to prevail here.
At least 600,000 New Yorkers play daily fantasy on DraftKings and FanDuel, having put up more than $200 million in entry fees combined in 2015.
The back-and-forth rulings show just how much turbulence lies ahead for the two fast-growing startups, each of which is said to be valued at more than $1 billion, putting them in the elite “unicorn” club.
In October, Nevada banned the two companies from doing business in the state until they obtained gambling licenses. FanDuel said earlier that it gets about 10% of its business from NY residents. An attorney for DraftKings said the company believes the “status quo should be maintained while the litigation plays out”.
FanDuel disagreed, saying in its statement: “The Attorney General’s argument for season-long fantasy sports being legal does not hold water – if season-long fantasy is legal, than daily fantasy is legal, and vice-versa”. By blitzing commercial air space and forging partnerships between major sports leagues, FanDuel and Draftkings have drawn a hefty amount of attention to themselves.
The decision is not a final word on whether daily fantasy sports constitute illegal gambling under the state’s laws and constitution.
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.
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There is a gray area when it comes to daily fantasy sites.
