FanDuel, DraftKings ordered to stop operations in NY
ALBANY — The two most popular daily fantasy sports sites in the nation will have to temporarily shut down operations in New York after a state Supreme Court judge issued an injunction Friday at the state’s request.
FanDuel Inc. and DraftKings Inc. were ordered to halt accepting bets from customers in New York after Attorney General Eric Schniederman first sent cease-and-desist orders to the companies last month.
The sites fought the order and vowed Friday to immediately appeal.
Judge Manuel Mendez wrote in his ruling: “The balancing of the equities are in favor of the (attorney general) and the state of New York due to their interest in protecting the public, particularly those with gambling additions.”
He added, “The protection of the general public outweighs any potential loss of business.”
Schneiderman praised the ruling, which came after a daylong hearing in Manhattan last month.
“We are pleased with the decision, consistent with our view that DraftKings and FanDuel are operating illegal gambling operations in clear violation of New York law,” Schneiderman said in a statement. “I have said from the beginning that my job is to enforce the law, and that is what happened today.”
Schneiderman’s office has contended that the daily fantasy sports contests are illegal under state law because they are gambling. The sites have claimed they are games of skill, not chance.
DraftKings attorney David Boies said the company is appealing.
“We are disappointed with the court’s decision, and will immediately file an emergency notice of appeal in order to preserve the status quo,” his statement read.
He added, “Daily fantasy sports contests have been played legally by New Yorkers for the past seven years, and we believe this status quo should be maintained while the litigation plays out.”
Mendez made clear in his ruling that his granting of Schneiderman’s injunction isn’t the end of the case, saying the injunction is “not a final determination of the merits and rights of the parties.”
The lawsuits will likely weave through the state court system and may ultimately end up with the state Court of Appeals, the state’s highest court.
The cases in New York have sparked a national debate about the legality of the fantasy sports sites. New York is at least the seventh state, as well as the largest, to seek to prohibit the daily fantasy sports contests.
The impact on the companies is signifincant. About 600,000 FanDuel customers have played in New York, which accounts for about 10 percent of the company’s total, the company said last month.
Schneiderman’s office said that daily fantasy sports differ from what had been traditional fantasy sports contents where players compete over a full sports season.
FanDuel and DraftKings allow users to pay money to enter daily or weekly contests. The customers select a lineup of players in a particular sport and can win money based on those players’ performance.
Schneiderman said last month that daily fantasy contests are a “new form of online gambling.”
“It really does lure in people who are the most prone to gambling addiction problems,” he said in a CBS interview.
Meanwhile, the state Legislature is considering remedies to the situation. The state Assembly held a hearing earlier this week on how to better regulate the games, and some lawmakers have introduced bills to make it legal, but overseen by the state.
The state constitution outlaws gambling, but it carves out exemptions for the lottery, charitable bingo, wagering on horse racing and private casinos.
Sen. Michael Ranzenhofer, R-Amherst, Erie County, introduced a bill last month that would legalize the contests.
“Time and time again, New York has stood in the way, whether by over-regulation or outright banning, of activities that are legal and enjoyed in most states across the country,” said Ranzenhofer, who represents part of the city of Rochester, in a statement Nov. 16.
Schneiderman, too, has said that the sites would need an exemption to the state’s gambling laws to operate.
“We’re saying that to have a truly level playing field, any type of gambling that wants to operate in New York has to have an exemption the same way the horse guys got it, the same way the casino people got it,” Schneiderman said Nov. 11 on “The Capitol Pressroom,” a public radio show.
Rep. Chris Collins, R-Clarence, Erie County, criticized the judge’s decision.
“The decision to temporarily deny more than 600,000 New Yorkers access to daily fantasy sports is extremely disappointing,” Collins said in a statement. “The hypocrisy of New York state banning this game of skill, while promoting their state lottery as ‘mak(ing) more New Yorkers rich than any other game,’ embodies the backwards and special interest driven priorities of our attorney general.”
Joseph Spector is the Gannett Albany bureau chief.
What’s next
A state Supreme Court judge issued an injunction Friday to FanDuel and DraftKings that will require them to shut down at least temporarily. The companies are expected to appeal the decision, which will lead to a prolonged court fight that may ultimately end up with the state’s highest court, the Court of Appeals.