Under Attack, DraftKings Said to Ask Partners to Pull Back

The Fine Line Between Fantasy Sports and Sports Betting
  • The fantasy sports firm asked to delay payments, sources say
  • Massachusetts and California could follow New York AG's lead

As part of a massive advertising blitz that eventually drew regulators’ attention, daily fantasy sports operators spent money on signs, lounges and Jumbotron ads in major league arenas. Now facing legal challenges in several states, at least one of the biggest daily fantasy sites is asking its major league partners to let it pull back.

DraftKings has asked some of its National Basketball Association partners to defer about 10 percent of its committed payments, according to people familiar with the deal. It has also asked that its signs and banners in arenas show up on television less often, according to one of the people.

This suggests that the company is trying to lower its profile at a time when it is facing an increasingly hostile political environment. DraftKings and FanDuel have also been spending less on television advertisements, although the companies say that it was always their plan to reduce marketing spending at this point in the NFL season.

“We have good relations and are in good standing with all of our partner teams. We are always in dialogue with them, including now," DraftKings said in a statement. FanDuel declined to comment on whether it too was seeking flexibility from any of its advertising partners.

It is also possible that DraftKings is trying to conserve cash in what might prove a long and costly legal battle. The company said it has hired Boies, Schiller & Flexner LLP to represent it, after Attorney General Eric Schneiderman declared that daily fantasy sports are gambling, and therefore illegal in the state. Schneiderman also ordered DraftKings and FanDuel specifically to stop accepting payments from New Yorkers, but neither company said it would comply.

On Wednesday, a California assemblyman asked the state’s attorney general to take similar action. In Boston, where DraftKings has its headquarters, Massachusetts Attorney General Maura Healey told reporters she considered daily fantasy sports to be a form of gambling, although she stopped short of saying she considered it illegal.

The companies, which are the two biggest daily fantasy sports sites by a wide margin, plan to fight Schneiderman’s order with a legal challenge, and with social action, including an e-mail campaign, a Twitter hashtag and an in-real-life rally Friday morning in New York.

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