DFS Gets the Boot in New York

New York State’s Attorney General, Eric Schneiderman, sent a letter to DraftKings and Fan Duel ordering them to cease offering their Daily Fantasy Sports (DFS) wagers games to New Yorkers. According to both ABC and ESPN, Attorney General Schneiderman sent a letter to both companies calling contest entries “wagers.”

“Our review concludes that DraftKings’/FanDuel’s operations constitute illegal gambling under New York law,” Schneiderman wrote in the letter, obtained by ESPN’s David Purdum and Darren Rovell, and ABC News.

The two sites are apparently going to fight this action.

“Fantasy sports is a game of skill and legal under New York State law,” FanDuel said in a statement. “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, coworkers and players across the country. 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 said they will look at legal options. (UPDATE: After I first posted this, there is a report that DraftKings will fight this.)

Let me state something that should be obvious to anyone who partakes in DFS: It’s gambling. Sure, it’s skillful gambling, but as I wrote in February 2014 it meets the criteria of what gambling is. And it is quite likely that FanDuel will be proven wrong under New York law.

The problem is that New York and many other states look at whether there’s an element of chance. Sure, skill predominates but there’s no way to honestly state there’s not an element of chance in DFS.

New York is definitely not going to be the last state where DFS gets the boot. I suspect Florida (where an Attorney General opinion makes legal DFS dubious at best) and Texas (where the politicians think gambling is a huge sin) are additional states in deep trouble.

What should DFS players do if they want to continue enjoying DFS? You should call your state representatives now. State legislators do listen to the public. And state legislators can absolutely influence what other elected politicians (e.g. state Attorney Generals) do.

Additionally, DFS players should consider keeping only the amount of money they need on the sites. The New York Attorney General statement used the words “criminal activity” to describe DFS. While I am hopeful that the DFS sites use segregated trust accounts, neither DraftKings nor FanDuel has confirmed that they do. It’s better safe than sorry, and that’s a good course of action today. (UPDATE: With the news that DraftKings will (apparently) fight this action, I now strongly advise that individuals keep just the minimum amount necessary on each site. I suspect that criminal charges are in the near future, and seizure of bank accounts is now a real possibility. The New York Attorney General will look at DraftKings’ continuing to operate in New York State as a slap in the face.)

DFS is in deep trouble, and the most likely outcome is a regime very similar to the current state of online poker in the United States–four to six states where DFS is legal. This doesn’t have to be how it winds up, but the arrogance of how the companies have been perceived to act (and are continuing to act) along with how gambling is traditionally regulated in the US makes that the most probable result.

UPDATE #2: Here is a link to a New York Times article that includes the letters to FanDuel and DraftKings. (Link to FanDuel letter; link to DraftKings letter. Note that the letters have basically identical content.) These letters warn that if the two sites do not cease operations, they will be subject to prosecution under various New York statutes. If these sites continue to operate in the face of the New York Attorney General notice, things are likely to get very ugly very fast.

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