What NY Attorney General Ruling on DraftKings & FanDuel Means for You

This week’s announcement from the New York State Attorney General’s office that ruled that daily fantasy sports games, specifically those runs by DraftKings and FanDuel, constituted illegal gambling has left many fantasy sports fans on Long Island and throughout the state of New York wondering exactly what this means for them. Eric Schneiderman, the NY Attorney General, issued a cease and desist letter to both companies ordering them to stop accepting wagers from New York residents. Meanwhile, both FanDuel and DraftKings have fired back stating their intent to fight the ruling and already high-powered attorneys have been hired to represent them in the upcoming legal battle royale.

For those unfamiliar with the popular trend of fantasy sports, the traditional method includes a group of individuals drafting players in a particular sport, most commonly football, baseball, hockey, and/or basketball, and assembling a roster of their own fantasy team that competes against the roster of the other participants in the league. Traditionally, this occurred over the course of an entire season and also involved the adding, dropping and trading of players over the course of that season. Since their origin in the 1980s, fantasy sports have become so popular that millions of Americans compete in leagues each year, and the subject became the basis for a sitcom on FX called The League, which has run for nearly a decade.

However, the newest take on traditional fantasy sports only arose in the past decade, and these “daily fantasy leagues” in question are significantly different than their league-long counterparts. Instead of competing over several months in a season, a daily fantasy player competes in a season that is only one day or one week at a time.

The central focus point at issue is whether daily fantasy sports are considered a game of skill or a game of chance, i.e. gambling. New York has taken the position that daily fantasy sports represent a game of chance in which the player has no control over the outcome of his wager. In essence, New York is claiming that picking a daily fantasy roster is the same thing as playing the lottery. You buy a ticket and from that point forward all results are purely random.

Conversely, DraftKings and FanDuel state that daily fantasy sports is a much more involved game of skill. Their theory is that the winners tend to be those with intense knowledge of the game, the players, the teams, and the attention to detail that fantasy owners bring. They claim there is skill involved in picking which players for your roster in a given day and daily fantasy gamers use that skill and knowledge to perfect their entries and ultimately win the big prizes.

Both sides appear to be digging in their heals on this distinction. Several large investors in both the sports world and corporate America back DraftKings and FanDuel; some of these include but are not limited to Major League Baseball, the NFL, the NBA, Google Capital, Fox Sports, Jerry Jones (owner of the Dallas Cowboys), and Robert Kraft (owner of the New England Patriots). While few would argue that there is not at least some knowledge and skill involved in knowing which matchups would be more likely for success than others in a daily fantasy league, the same can be said for other traditional gambling games of chance such as the table games poker, blackjack, or craps, which are all illegal in New York. Ultimately, the courts will decide in which category daily fantasy sports belongs.

For the approximately 600,000 New York residents registered on the two sites, the big question on their minds is whether they can continue to play daily fantasy sports on these sites. For now, the answer appears to be yes. Both DraftKings and FanDuel are continuing to accept entries from New York, but they still have five days to appeal the Attorney General’s ruling, something they will surely pursue. Once the five days are up, an injunction will likely be requested to keep the sites up and running pending a court ruling. The Attorney General’s office has also made it clear that it is not looking to prosecute the actual users (voters) of the sites, but the sites themselves.

Ultimately, this issue may settle upon regulation rather than abolishment of daily fantasy sports. Similar legislation and regulation is pending and being demanded in other states, such as Nevada and Florida. Even in New York, the State Assembly has petitioned for a task force to examine the industry and determine if an exemption to the New York gambling laws is needed, similar to the horse racing industry and private casinos currently operating in the state.

Stay tuned!

 

“What NY Attorney General Ruling on DraftKings & FanDuel Means for You” was written by Michael B. Schulman, Managing Attorney.