DraftKings, FanDuel Ask Court To Overturn New York State Ban

draftkingsAs expected, fantasy sports businesses are fighting back against the New York state attorney general’s determination that DraftKings and FanDuel are actually illegal gambling sites and should not be allowed to operate in the state. This morning, both DraftKings and FanDuel asked the court to overturn that decision.

The two sites filed separate actions in a New York Supreme Court in Manhattan. In the DraftKings complaint [PDF], the website accuses New York attorney general Eric Schneiderman of “misreading New York’s gambling laws” and “attempting to bully DraftKings” into immediately shutting down its New York operations “before it even has a chance to defend itself.”

DraftKings says the AG went too far by only giving them a five-day window to cease operating in New York. What’s more, the site accuses Schneiderman of “threatening to take action” against DraftKings’ business partners and vendors “unless they immediately ceased performing services for DraftKings in New York.”

The site is seeking an emergency injunction “to bar the Attorney General from continuing to abuse his power and to prevent the irreparable harm that will result from it.”

In a statement e-mailed to Consumerist, DraftKings writes:

“Today, we have taken decisive legal action to prevent a unilateral, misinformed and legally misguided attempt by the New York Attorney General to act as ‘judge, jury and executioner’ for daily fantasy sports in New York. We are asking the New York Supreme Court to rule that the Attorney General’s cease-and-desist letter is unconstitutional, an abuse of discretion, and simply wrong. We are confident in our legal position and intend to continue to fight to preserve the right of the over 500,000 New York consumers to play the fantasy sports games they love.”

As first reported by the NY Post, FanDuel filed a similar complaint [PDF] with the same court on Friday.

That site contends that a shutdown of FanDuel in NY state would “deprive hundreds of thousands of subscribing New Yorkers of the opportunity to pit their skills against the skills of others in selecting a ‘fantasy’ team of athletes from different sports teams and competing in contests offering prizes to the players whose fantasy teams perform best.”

“As we said, this week was only the beginning of the legal process,” a FanDuel rep tells Consumerist. “We have a legal business that millions and millions of people love and we are entitled to due process and look forward to being heard in court.”

UPDATE: In a statement to Consumerist, Damien LaVera, Schneiderman’s Communications Director, says:

“The Attorney General’s job is to enforce New York State law, and the law here is clear. Online sports gambling sites are illegal in New York. DraftKings and FanDuel are operating illegal sports betting websites under New York law, causing the same kinds of social and economic harms as other forms of illegal gambling. As a result, our office issued a cease and desist letter to stop them from violating state law by accepting bets from people in New York. Because both companies have refused to follow the law in our state, we will take action to enforce state law.”


At issue is the question of whether fantasy sports sites are “games of chance” or “games of skill.”

A 2006 federal law, the Unlawful Internet Gambling Enforcement Act (UIGEA), bars banks, credit card networks, and payment processors from doing business with online gambling operations, effectively making it impossible for a gambling site to make money.

But that law includes a specific exemption for fantasy sports, because it considers them to be a game of skill that is not as reliant on luck or happenstance as traditional gambling.

However, New York state’s definition of gambling is much less forgiving when it comes to “contests of chance,” 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.”

If the court finds that Schneiderman was correct in concluding that fantasy sports are indeed gambling, then they would be illegal in New York state, and financial services would not be allowed to process fantasy sports transactions for NY residents.

Before the recent explosion of interest in fantasy sports, five states — Arizona, Iowa, Louisiana, Montana, and Washington — already had rules barring residents from participating, and both FanDuel and DraftKings obliged by not allowing people from these states to enter cash-prize contests.

Nevada recently became the sixth state to bar fantasy sports sites, saying they are the equivalent of unlicensed sportsbook operations. Both sites have subsequently added Nevada to their respective lists of states from which they can not accept payments.

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