New York Ban on FanDuel and DraftKings

On Tuesday, November 10th, the New York Attorney General's office gave orders for a “cease and desist” on all daily fantasy sports bets for the two major companies, DraftKings and FanDuel. The order demands the companies halt the acceptance of any bets from New York residents on the grounds that their business constituted illegal gambling under New York State law. Eric T. Schneiderman, the acting New York Attorney General, has been strongly against gambling since taking office and believes the companies are preying on sports fans.

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. Today we have sent a clear message: not in New York, and not on my watch.

It is likely that the order came with due deliberation, as the game is seen as a controversial gambling option and is under further investigation in several states. The decision will have a significant impact on the daily fantasy sports industry. Schneiderman’s decision will eventually freeze over half a million New Yorkers that have regular accounts, as well as stop anyone who tries to create a new account that resides in New York. However, as of now New York residents can still log on to their accounts and play.

The Defense of DFS Websites

In defense of the daily fantasy sports platforms, the argument has been made that their gameplay requires skill and not luck. In 2006, the United States Congress passed the Unlawful Internet Gambling Enforcement Act that abolished virtually every possible illegal gambling game online. The act also eliminated traditional sports betting, which was already on its way out since the Wire Act of 1961. However, the UIGEA did not ban fantasy sports betting, due to it requiring a certain amount of skill to be successful.

Game of Skill vs. Game of Luck

Aspects of the game require a great deal of knowledge about football strategy. “Team managers” or participants need to research several variables including statistics, coaching strategies, team schemes, injury reports, and much more before expecting success. Ultimately, Congress deemed that the gambling option had far more skill-based components than chance ones, thus allowing all United States residents to participate legally through federal law.

Why States are Banning DFS

However, although the game is federally legal, a growing handful of states in the Union see the competition as an illegal form of gambling. Since United States law gives precedence to the State’s law in regards to gambling, New York can join the small list of a DFS-free states.

It is sure that the multi-billion dollar companies that are DraftKings and FanDuel will retaliate in any legal way possible. Representatives from both corporations have spoken out on the matter. Sabrina Macias from DraftKings spoke on Schneiderman’s decision:

We are disappointed he has not taken the time to meet with us or ask any questions about our business model before his opinion. We strongly disagree with the reasoning in that opinion and will examine and vigorously pursue all legal options available.

FanDuel will also stick to their guns stating:

Fantasy sports is a game of skill and legal under New York state law. 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.

Like its competitor DraftKings, FanDuel is also seeking legal options for their future in the Empire State.

Conclusion

The final decision of the Attorney General came after examining a pending investigation on a DraftKings employee who made over $350,000 by using secret company information. The case allowed Schneiderman to ask for internal information on fraud prevention. With enough information, the New York Attorney General was able to shut down the operations on the basis that “daily fantasy sports appears to be creating the same public health and economic problems associated with gambling.”

It seems that New York has seen its end to daily fantasy sports. With both powerhouse platforms taking legal action, DraftKings and FanDuel will do everything they can to prove their competitions are based on skill. Hopefully, the future holds a deeper investigation on whether or not the game contains enough elements of chance to deem it illegal.

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