Eric Schneiderman has a win for the moment, but DraftKings and FanDuel might win the right to operate in New York in the NY legislature in May.
FanDuel and DraftKings have agreed to stop allowing real money play on their sites in New York state, at least until comprehensive new fantasy sports laws are enacted by the New York legislature. The decision is part of an agreement with New York Attorney General Eric Schneiderman.
The two sides had been in a legal battle since late-November 2015. The case was expected to be resolved in May, but Monday’s deal takes the case out of court for the time being. Now, both sides are going to try to convince lawmakers to see their side of the argument. It is expected that a fantasy sports bill is going to pass in the legislature by mid-May.
Eric Schneiderman’s Ban on Fantasy Sports
The battle over daily fantasy sports in New York began in mid-November 2015, when Attorney General Eric Schneiderman accused the two largest DFS companies of operating illegal online gambling sites in the state. Schneiderman also claimed DraftKings and FanDuel were guilty of “false advertising and consumer fraud”. He sent them a cease-and-desist order and gave each 5 days to comply.
In response, DraftKings and FanDuel sued the office of Eric Schneiderman, seeking help from the New York Supreme Court. The court sided with Schneiderman, but gave DraftKings and FanDuel the right to continue accepting entries from New York real money players, at least until a court ruling happened.
$2 Billion in Fines and Fees
In January 2016, Schneiderman added to his legal brief a demand for compensation for all the New York DFS players who lost money to the two companies over the past few years. Not only would the companies be made to pay back all the money players lost, but they would be required to pay an addition $5,000 per player.
The move was seen in the gaming community as an attempt by the New York attorney general to turn up the pressure on the daily fantasy sports companies, by greatly raising the stakes if they lost. It appears to have worked, because FanDuel and DraftKings have agreed to take the case to the legislature, while also agreeing to stipulations which could be a threat to the companies. According to reports, the false advertising and consumer fraud charges remain in the court filings.
AG’s Statement on the Deal
Eric Schneiderman issued a statement to the media, claiming vindication for his earlier decisions and suggesting he had protected the people from New York state. Schneiderman said, “As I’ve said from the start, my job is to enforce the law, and starting today, DraftKings and FanDuel will abide by it.”
Under terms of the deal, if the New York legislature fails to pass a daily fantasy sports bill, the case will be heard in September. Until then, the two companies cannot accept entries by people from New York IP addresses in their many contests, which involve sports like NFL football, MLB baseball, NBA basketball, and NHL hockey. Also, if a customer asks to withdraw their money, the companies must comply within 7 days.
Despite the appearance created by Schneiderman of the companies caving to his pressure, appearances might be deceiving in this case. Legislative insiders suggest that the companies are going to receive the right to accept players from New York, though they might have to play within a regulatory framework.
Pretlow Predicts DFS Law in May
Democratic state congressman J. Gary Pretlow said he expects the New York legislature to legalize online daily fantasy sports in May. If so, then DraftKings and FanDuel will be able to access a customer base which represents about 10% of their revenues.
Hundreds of thousands of New Yorkers gamble on fantasy sports each year. Most players bet among friend in local leagues which take course over a full season — what is called “yearly fantasy sports”. DraftKings and FanDuel instead handle contests involving a single set of games on a single day. These contests closely resemble sports betting, which is banned in 46 states (and New York).
Protecting Underage Gamers
Assemblyman Pretlow said lawmakers’ main concern is protecting those who should not be gaming at all. The lawmaker said, “The top concern is ensuring the underage, or minors, aren’t participating.”
The congressman suggested that DraftKings and FanDuel would face regulations, if a DFS bill passed. These regulations would include taxation by the state, as well as a licensing process. It is uncertain which governing body would handle the licensing, though the New York Gaming Commission is a likely option.
