Update: DraftKings, FanDuel Granted Stay, Can Continue in NY

Updated at 4:19 p.m. on Dec. 11, 2015: ESPN sports financial reporter Darren Rovell reports that DraftKings and FanDuel have been granted a stay from the earlier court ruling, and both can continue operations in New York through the end of the year.

Original story: A New York State Supreme Court judge Friday issued a ruling banning Daily Fantasy Sports websites DraftKings and FanDuel from taking wagers from New York residents.

Supreme Court Justice Manuel J. Mendez sided with New York Attorney General Eric Schneiderman in granting the injunction against the two companies, by far the largest in the DFS industry. The two companies plan to appeal, according to Reuters.

At issue is whether the two websites constitute gambling, which Schneiderman contends they do, which violates New York laws.

“New York State penal law does not refer to ‘wagering’ or ‘betting,’ rather it states that a person, ‘risks something of value,’” Mendez wrote, as reported by ESPN. “The payment of an ‘entry fee’ as high as $10,600 on one or more contests daily could certainly be deemed risking ‘something of value.’”

The two companies argue that DFS are games of skill, not of chance, and as such they say the sites should be considered legal. Both have attracted big name investors and deals with professional sports leagues, not to mention they also rake in millions of dollars from fans who play on their sites.

Friday’s ruling bars the two from New York until a final decision is reached following a trial in 2016.

“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,” said Schneiderman in a statement. “I have said from the beginning that my job is to enforce the law, and that is what happened today.”

FanDuel issued the following statement concerning the ruling:

“We will be appealing — this is only the beginning of the legal process and, perhaps more importantly, the New York legislature is already moving forward on action to ensure our game remains legal and is regulated, which we strongly support. The court specifically noted that this was not a final determination of the issue and that discovery would be needed to fully resolve the legal question, which we think should be decided in our favor when all of the evidence is in.

New Yorkers have been able to legally play our games for more than six years, and today’s preliminary decision was wrong and we expect we will ultimately be successful. A number of issues became very clear in court: first, the outcome of fantasy sports contests are determined by skill, not chance. Second, the Attorney General’s argument for season-long fantasy sports being legal does not hold water — if season-long fantasy is legal, then daily fantasy is legal, and vice-versa. The court was very concerned about this issue, but found the issue of whether the AG was failing to enforce against seasonal fantasy sports was not yet squarely before the court – but it will be. As the court itself noted, FanDuel is permitted in other states, making New York very much an outlier on the issue, as most states are moving towards sensible regulations — not bans, but the Attorney General decided he knows what is best by denying New Yorkers access to a game they have embraced and shared with friends and family for years. We remain committed to ensuring all fantasy sports are available to New Yorkers, and will work to bring our product back to sports fans around the State through our appeal and working with the legislature to enact sensible regulations for fantasy sports.”