DraftKings, FanDuel get booted from NY

Judge Mendez ruled that the 2006 Unlawful Enforcement of Internet Gambling Act (UIGEA), which distinguishes between “games of skill” and “games of chance” and has been used as a defense of daily fantasy in the past, was not relevant under New York State law.

FanDuel, meanwhile, had already suspended play from NY amid the sites’ clash with state Attorney General Eric Schneiderman over whether daily fantasy sports amounts to illegal gambling.

But the judge’s ruling today may signal an uphill battle for these billion-dollar upstarts, a battle whose outcome could have an impact beyond New York’s borders. Much of the debate comes down to whether the games are based on chance or skill. However, attorneys for DraftKings and FanDuel immediately appealed the decision, and an appellate judge, in a one-sentence order, postponed Mendez’s decision. DraftKings lawyer David Boies (BOYZ’) said Friday the company believes the “status quo should be maintained while the litigation plays out”.

Both sites said they would ultimately prevail in their dispute, which is reflecting debate nationwide about whether playing fantasy sports is betting.

It is not yet known how the decision will impact active bills in the legislature that deal with DFS in NY, with assemblyman Dean Murray having put forward a bill just this week in an effort to alter state law over DFS. This immediate stay was granted, so we will remain fully operational in NY.

The ruling Friday will be followed by the appeals by the companies, as well as the discovery process as the case gets a further review by Mendez.

“We are pleased with the decision, consistent with our view that DraftKings and FanDuel are operating illegal gambling operations in clear violation of NY law”. But DraftKings continued to accept NY players, arguing it was allowed to do so until the judge took action on Schneiderman’s motion.

Schneiderman had launched an investigation into DraftKings and FanDuel in October after an “insider” scandal raised questions about the companies’ consumer protection policies and safeguards. Massachusetts Attorney General Maura Healey has proposed regulations that, if accepted, would allow all companies with a daily fantasy product to continue doing business in her state.

A judge today granted the injunction sought by the New York Attorney General’s Office that prevents the operators from taking bets from New Yorkers for the duration of the case.