Fresh from pursuing Exxon-Mobil over potentially false statements about the climate change, state Attorney General Eric Schneiderman is spoiling the fun for hundreds of thousands of New Yorkers who enjoy fantasy sports games.
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The cease-and-desist letters State Attorney General Eric Schneiderman sent to both companies this week demand they stop accepting money and entries from NY players within five days. He says the companies are in violation of state law against illegal gambling.
“Daily fantasy sports is neither victimless nor harmless, and it is clear that DraftKings and FanDuel are the leaders of a massive, multibillion-dollar scheme meant to evade the law and fleece sports fans across the country”, he said. Coakley says DraftKings intends to challenge the cease-and-desist, and they’re reviewing their options.
NY is the second state to move to shut down fantasy sports companies-in October, Nevada ruled that the games were considered gambling and thus, required a license.
Q: Is there any avenue available for these companies to get licensed as legal gambling operations in NY? Entrants then compete using the real-life statistics generated by the sports players. Daily fantasy has quickly and forcefully injected itself into popular culture, and that assault has made it an easy and newsworthy target for politicians and lawyers. Lawmakers around the country expect the fantasy sports industry to make a push for clear legalization. On average, they spend about $465 per year. NY customers can continue to play games that are free, she said. Combined, the companies claim they will pay out a few $3 billion to winners this year.
Marc Dunbar, a partner at the law firm Jones Walker, said FanDuel will have an incredibly hard time proving that there is not a chance aspect to the activity of daily fantasy sports – making contests illegal in NY.
Schneiderman, in a letter to DraftKings and FanDuel on Tuesday, declared that the two daily fantasy sports sites were running an illegal gambling operation. With FanDuel and DraftKings (and competitors including Yahoo), fans can choose a new fantasy team for each day on which their sport has games going.
“New York’s actions today are an unfortunate example of a state government stifling innovation, technology and entrepreneurship and acting without full and fair consideration of the interests of consumers”, the statement added.
Several NHL player agents, for instance, say the league and union should agree on a policy for players and league employees participating in fantasy sports games.
“We continue to monitor reports concerning daily fantasy sports”, National Basketball Association spokesman David Bass said.
One-point-one million people use the sites in NY.
The long-term question is whether Congress will step in to ban daily fantasy sports, as it did with online poker in 2006.
The grounds for the accusation lie in that Schneiderman said they offer winnings to their customers not based on skills but rather on chance.
Research released in July by Sports Business Daily showed that over a three-month period 91 percent of profits collected by players at DraftKings and FanDuel were won by just 1.3 percent of the players.
NY and Nevada have become the sixth and seventh states to prohibit fantasy sports leagues from operating for money.
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As the AG has said, she believes strongly that there must be a strong legal and regulatory framework in place for this new industry. Washington Redskins wide receiver Pierre Garcón filed class-action suit on behalf of all NFL players against the fantasy football site FanDuel for improperly exploiting the players’ popularity and performance.
