Fight Escalates Between NY AG and DraftKings, FanDuel

This story was updated to add information that FanDuel said it would temporarily stop taking bets from New Yorkers.

Despite a cease-and-desist order from Attorney General Eric Scheiderman this week, Daily Fantasy Sports sites DraftKings and FanDuel have continued to take bets from New York residents, and now Schneiderman is vowing enforcement.

But the two companies plan to continue their business in the Empire State, and both have filed separate lawsuits against the AG to stop his move, reports The Wall Street Journal.

The two companies - FanDuel is based in New York, DraftKings in Massachusetts - accuse Schneiderman’s office of using “strong-arm tactics” and going outside of its purview by trying to stop payment processing companies from working with the sites.

Schneiderman’s order went beyond those of other states, like Nevada, that have sought to prohibit the two companies from taking bets from its residents. The other states want the companies to proceed under their laws and certification process, while New York calls the enterprises “illegal gambling” sites and wants them out of the state.

FanDuel could continue to run its business in New York, just not accept bets from its residents, and on Friday the company said it would stop taking bets from New Yorkers while it pursues the matter in court, reports the New York Post. DraftKings has not issued a statement that it, too, would stop but has until Nov. 17 when Schneiderman expects to start enforcement.

“The NYAG, in a November 10, 2015 cease and desist letter that the NYAG disseminated to the press, has taken the legally incorrect position that the presence of prize money in these contests transforms FanDuel’s activities into illegal sponsorship of gambling, and that FanDuel’s advertisements have been false and misleading,” the company’s lawsuit states. “FanDuel is entitled to a declaration that its conduct is legal and an injunction against enforcement efforts based on claims of illegality by the NYAG, so that FanDuel’s New York business is not destroyed as a result of the NYAG’s claims.”

Adds DraftKings in its filing, “The Attorney General, misreading New York’s gambling laws, is attempting to bully DraftKings—a celebrated company offering Daily Fantasy Sports (“DFS”) to millions of Americans—and its vendors into immediately shutting down DraftKings’ New York operations before it even has a chance to defend itself.”

At stake is a whole lot of money, if other states follow New York’s lead. Billions of dollars, if you believe the barrage of advertisements with which the two companies have carpet-bombed television networks, radio stations and the internet. FanDuel and DraftKings sit atop of an industry, Daily Fantasy Sports, that has signed multimillion-dollar deals with professional sports leagues, and claim to pay out tens of millions of dollars per week to winners.

And in New York, one thing is certain, a lot of people are playing on the sites. FanDuel claims 600,000 New Yorkers play on its site, while DraftKings says 500,000 residents use its site, according to the Chicago Tribune. A lot of those people probably have accounts on both, but it’s still an awful lot of people, in fact, New York represents the highest percentage of Daily Fantasy Sports players in North America, according to the WSJ.

Lawsuits or not, Scheiderman is promising action.

“The Attorney General’s job is to enforce New York State law, and the law here is clear,” said Schneiderman in a statement. “Online sports gambling sites are illegal in New York. DraftKings and FanDuel are operating illegal sports betting websites under New York law, causing the same kinds of social and economic harms as other forms of illegal gambling. As a result, our office issued a cease and desist letter to stop them from violating state law by accepting bets from people in New York. Because both companies have refused to follow the law in our state, we will take action to enforce state law.”

As could be expected, Schneiderman’s move has not been popular with many of the sites’ users in New York, some of whom protested outside of his Manhattan office on Friday.

Their battle cry? “Let us play!”

Click here to read the full story on The Wall Street Journal website.

Click here to read the full story on the Chicago Tribune website.