Four months after Yahoo announced it would offer sports fans the opportunity to make money by betting on professional athletes’ performances, the company became the latest target in a New York state investigation into the business practices of the currently unregulated multi-million dollar online daily fantasy sports industry. 

The New York Times, citing a person familiar with the matter, reports that the New York Attorney General’s Office issued a subpoena to Yahoo related to the ongoing investigation into other online fantasy sites FanDuel and DraftKings.

Yahoo Sports Daily Fantasy – the third largest daily online fantasy sports site behind FanDuel and DraftKings – continued to allow New Yorkers to play daily fantasy games as of Wednesday.

The online fantasy service is available through a mobile app and allows users to compete in groups or individually by betting on a professional athlete’s performance. The site is currently only available in the United States, except for Arizona, Florida, Iowa, Louisiana, Montana, Nevada, and Washington.

“Yahoo does not comment on legal matters,” a spokesman said in a statement to the NYT. “We are monitoring industry trends and events closely and believe that we offer a lawful product for our Daily Fantasy Sports users.”

News of Yahoo’s inclusion in ongoing daily fantasy investigation comes just hours after New York Attorney General Eric Schnedierman filed lawsuits against both FanDuel and DraftKings, seeking to stop them from offering their service to New Yorkers.

According to the lawsuits, business practices utilized by the companies violate state laws that prohibit the promotion of gambling and “repeated or persistent fraudulent conduct.”

The complaints claim that these sites run “casino-style gambling operation[s]… where bettors can wager up to $10,000 per ‘line-up’ and enter for a chance to win jackpots of more than $1 million.”

Combined, the two companies have spent nearly $100 million on advertising this year. DraftKings ads promote the site with statements like, “It’s the simplest way of winning life-changing piles of cash,” while FanDuel likes to say, “anybody can play, anybody can succeed.”

The lawsuits also take issue with the sites’ “anyone can win” advertising, and point to the companies’ own data to show that the vast majority of players lose money.

In 2013 and 2014, 74% of the people who spent the most money on FanDuel lost money. During those same years, 89.3% of all DraftKings players had an overall negative return on investment on the site.

By allegedly misrepresenting that a casual player is likely to win a jackpot and that daily fantasy is not gambling, the state argues that these sites have engaged in deceptive acts and practices in violation of the state’s general business law.

As we’ve explained before, fantasy sports betting was exempted from a 2006 law barring financial institutions from transferring money to these sites. The argument at the time was that fantasy sports are games of skill, rather than gambling.

Still, online fantasy sports sites like FanDuel and DraftKings – and now Yahoo – have become the center of intense scrutiny from federal and state regulators and law enforcement agencies in recent months.

Back in October, the FBI announced it had opened an investigation into the legality of online daily fantasy sports sites. That same day, Nevada gaming regulators declared that these sites are unlicensed gambling businesses and barred them from operating in the state.

Just a month later, New York jumped on the investigation bandwagon after Attorney General Eric Schneiderman sent letters to both DraftKings and FanDuel telling them to cease and desist selling their fantasy sports betting services in the state after concluding that, according to New York state law, the daily fantasy sports sites are unlicensed gambling operations.

End Sought to Fantasy Sites in New York; Yahoo Is Said to Be Added to Inquiry [The New York Times]

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