Fantasy Sports Sites Ordered to Stop Taking Bets in New York

by | November 11, 2015

By Candice Ruud

New York's attorney general ordered popular daily fantasy sports companies DraftKings and FanDuel Tuesday to stop accepting bets in the state, saying their operations amount to illegal gambling.

In issuing the cease-and-desist order, Attorney General Eric T. Schneiderman said a monthlong investigation by his office concluded the daily contests are games of chance, not skill.

He contrasted the sports sites -- a multibillion-dollar industry -- with traditional fantasy leagues, which he said remain legal.

Schneiderman said his office's investigation found that "unlike traditional fantasy sports, daily fantasy sports companies are engaged in illegal gambling under New York law, causing the same kinds of social and economic harms as other forms of illegal gambling, and misleading New York consumers."

"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 intended to evade the law and fleece sports fans across the country," Schneiderman said in a statement.

In letters sent to the companies, Schneiderman's office further contrasted DraftKings and FanDuel with traditional fantasy sports, whose participants "conduct a competitive draft, compete over the course of a long season, and repeatedly adjust their teams. They play for bragging rights or side wagers, and the Internet sites that host traditional fantasy sports receive most of their revenue from administrative fees and advertising, rather than profiting principally from gambling."

Schneiderman said DraftKings and FanDuel "are in active and full control of the wagering," and profit directly from it. The companies also mislead players about their prospects of winning, he said.

New York-based FanDuel rebuffed the allegations Tuesday, saying fantasy sports are a game of skill and legal in the state.

"This is a politician telling hundreds of thousands of New Yorkers they are not allowed to play a game they love and share with friends, family, co-workers and players across the country," the company said in a statement. "The game has been played -- legally -- in New York for years and years, but after the Attorney General realized he could now get himself some press coverage, he decided a game that has been around for a long, long time is suddenly now not legal."

DraftKings, based in Boston, said it was disappointed, "particularly since he [Schneiderman] did not take any time to understand our business or why daily fantasy sports are clearly a game of skill."

In a statement, DraftKings vowed to "vigorously pursue all legal options available to ensure our over half a million customers in New York State can continue to play the fantasy sports games they love." The company said it has 500,000 customers in New York.

The sites have come under increased scrutiny since it was revealed last month that a midlevel DraftKings employee playing fantasy football beat more than 200,000 other players, winning $350,000 on rival FanDuel. The case raised questions about insider trading after game data not publicly accessible was inadvertently posted online.

The companies have said their employees didn't appear to violate industry rules but launched internal probes and barred their workers from playing on rival websites.

Those developments prompted Schneiderman to look into the companies. Elsewhere, regulators in Nevada ordered the sites to shut down last month, ruling they couldn't operate in the state without a gambling license.

The companies have five days to contest the attorney's general's cease-and-desist order before a judge will enforce or dismiss Schneiderman's order.

With Michael Gormley and AP

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