A report from the New York Times, published Tuesday, indicates that the New York State attorney general has ordered FanDuel and DraftKings, two of the biggest daily fantasy sports companies, to cease operations in New York. Per the report, attorney general Eric T. Schneiderman determined that FanDuel's and DraftKings' games constitute illegal gambling under state law.
The cease-and-desist order by the attorney general, Eric T. Schneiderman, is a major blow to a multibillion-dollar industry that introduced sports betting to legions of young sports fans and has formed partnerships with many of the nation's professional sports teams. Given the New York attorney general's historic role as a consumer-protection advocate, legal experts say the action will most likely reverberate in other states where legislators and investigators are increasingly questioning whether the industry should operate unfettered by regulations that govern legalized gambling.
DFS companies like FanDuel and DraftKings have long sought protection by arguing that there is more skill involved in their games than luck.
DraftKings, which, per the Times, has approximately 500,000 players in New York state, sent out a prepared email to its players on Tuesday as news of Schneiderman's decision began to emerge.
"Attorney General Eric Schneiderman is considering preventing New Yorkers from playing daily fantasy sports," and added: "Hey, New York, protect your right to keep playing daily fantasy sports. Contact the attorney general today!"
DraftKings spokeswoman Sabrina Macias added that the company is disappointed the New York attorney general did not reach out to them to discuss the matter.
"We're disappointed he hasn't taken the time to meet with us or ask any questions about our business model before his opinion."
FanDuel offered a statement as well.
"Fantasy sports is a game of skill and legal under New York state law. This is a politician telling hundreds of thousands of New Yorkers they are not allowed to play a game they love and share with friends, family, co-workers and players across the country."
The attorney general's inquiry began after Ethan Haskell, a DraftKings employee, published sensitive internal material - a percentage owned chart - the same week that he won $350,000 playing on FanDuel. An internal investigation commissioned by DraftKings found that Haskell could not have used the material to his benefit because he was not given access to it until after that weekend's lineups had been set.
As a separate Times report notes, this raises several uncomfortable issues for the DFS world - many of the DFS companies currently enjoy investments from operators of online gambling sites.
Just last month, Nevada regulators ruled that daily fantasy sports should be considered gambling and not games of skill. The F.B.I. office in Boston has begun interview daily fantasy players and a Florida grand jury has subpoenaed records of "the fantasy sports trade group."
