Ruling On Fantasy Football Sites

Daily fantasy sports sites FanDuel and DraftKings got a reprieve late Friday, when a NY appellate judge stayed an order directing the companies to immediately stop operating in the state.

In October, New York Attorney General Eric Schneiderman launched an investigation into allegations that employees at FanDuel and DraftKings were using inside information to win money on the websites.

The preliminary injunction handed down Friday – the one that ordered the two companies to shut down – is still relevant.

The two sites had asked New York State Judge Manuel Mendez to block Schneiderman’s efforts to shut down their games for New York players, arguing that it would be unfair hurt to their business while their case is argued in court.

The sites’ lawyers had argued that since they were not taking “wagers” but entry fees DFS could not be viewed as gambling under state law, an argument that Mendez dismissed.

However, by Friday afternoon, daily fantasy’s standing in NY looked slightly less bleak, as an appellate judge granted both operators an emergency temporary stay that will allow them to continue accepting entries in the state through the end of the calendar year. As a result, FanDuel halted operations in the state shortly after.

Experts say the legality of the games is highly questionable in Florida, where the law doesn’t distinguish between games of chance and skill.

The decision in NY could influence Harris to take action before the state assembly can gather to discuss future legislation.

This ruling was a major blow to the sites: 12.8 percent of all daily fantasy sports players live in NY, according to stats from Eilers Research cited by multiple outlets.

The attorney general has said that while the games can involve some skill, that doesn’t make them legal, since the outcome ultimately depends on events out of customer control, such as athletes’ injuries, weather or even blown calls. FanDuel and DraftKings will each be able to continue operating out of their NY offices; they just can’t serve customers from the state for the time being.

In Washington, the gambling commission specifically concluded that fantasy sports wagering is illegal.

Privately-held FanDuel and DraftKings may have painted targets on their own backs with aggressive advertising at the start of the National Football League season that promised large winnings.

Schneiderman has argued the games are illegal gambling operations. The investigation soon expanded into whether the business model of fantasy sports sites broke NY law, which outlaws contests that are substantially chance-based.

Fantasy sports started in 1980 and surged in popularity online. In November, a New York Legislator proposed a bill that would classify participation on fantasy sports sites as games of skill. The state already has legalized some forms of gambling, including lotteries, betting on horse racing, video slot machines at racetracks and a number of forthcoming casinos.