Just In Time For Football, New York Changes Law To Legalize DraftKings, FanDuel

The nearly year-long legal battle between the state of New York and daily fantasy sports (DFS) sites DraftKings and FanDuel has all but come to an anticlimactic end today, with Governor Andrew “Not the one from TV” Cuomo putting his name to a new law that explicitly legalize certain DFS contests within the Empire State.

At issue was whether the DFS sites violated New York state laws regarding illegal gambling. In Nov. 2015, NY Attorney General Eric Schneiderman’s office concluded that DraftKings and FanDuel constituted unlawful “contest of chance” as defined in the statutes, and directed the two sites to cease operating in the state.

What ensued was a legal back-and-forth, with Schneiderman suing the two companies over not just the alleged gambling, but also accusations of false advertising. A state court first ordered the sites to temporarily stop operating in New York, only to immediately grant them a stay, allowing operations to continue.

All the while, the daily fantasy industry was pouring millions into lobbying efforts in Albany and other state capitals to pass or amend laws in order to protect the legality of DFS.

In March 2016, Schneiderman and the DFS sites reached a deal. They would cease operating in New York for a few months, giving the state legislature some time to listen to the lobbyists.

Various New York state legislators made attempts at introducing bills to carve out an exemption for DFS in the state. One finally stuck. This bill specifically calls out DFS as a “game of skill,” which would therefore make it legal.

The bill does include a handful of apparent consumer protections intended to safeguard against abuses by DFS players.

For example, players on a site can only have one active account at a time. Minors are barred from playing (duh), and if a DFS site learns that a minor has entered a contest, the site must refund that player’s deposit within two business days (offset by any winnings the kids might have made before being discovered). Sites must also publish and make available parental control procedures to help parents block kids from playing.

One of the bigger critiques against DFS sites is that only a few elite players really win any money from the site, and that some of these “sharks” do so by swallowing up new players who don’t know what they are getting into.

The new law requires sites to instruct new players on how they can identify “highly experienced” players. These sharks must be tagged with some sort of symbol next to their name “or by other easily visible means.”

In the interest of transparency, DFS sites must “make clear and conspicuous statements” about the odds of winning or the number of winners “that are not inaccurate or misleading.”

So if a site’s ad mentions the likelihood of winning, the ad must include at least the median and mean net winnings of all players, and the percentage of winnings awarded by that site to highly experienced players during the last calendar year.

Though the sites have lobbied — successfully — that they are not gambling operations, the new law requires that they prominently display contact information for organizations that help compulsive gamblers.

“We are thrilled Governor Cuomo has signed the fantasy sports bill and we thank him for his support of this important legislation,” says DraftKings CEO Jason Robins. “We are excited to have our DraftKings contests return to New York and bring the fun and excitement of DFS back to our fans.”

In a statement, Schneiderman points out that his previous conclusions about DFS were based on the law at the time, but now DFS is legal — assuming sites meet the new standards — in the state’s eyes.

“As I’ve said from the start of my office’s investigation into daily fantasy sports, my job is to enforce the law and protect New Yorkers from illegal or unscrupulous conduct,” said the AG. “I will enforce and defend the new law.”

While the gambling complaint against DraftKings and FanDuel is now moot, Schneiderman says the two sites will still have to answer for the allegations of false advertising and consumer fraud.

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