Daily fantasy sports sites FanDuel and DraftKings have always maintained that the services they offer don’t count as gambling because they’re contests of skill. On Tuesday, New York Attorney General Eric Schneiderman cast the most important vote yet against this argument. In letters to both companies, Schneiderman defined daily fantasy sports as illegal gambling under New York state law, saying that “winning or losing depends on numerous elements of chance to a ‘material degree.’” If public officials in other states agree, it could be the end of the daily fantasy sports industry in the U.S.
FanDuel and DraftKings have cited a 2006 federal law to distinguish themselves from illegal gambling. But that law explicitly defers to state definitions of what counts as betting. In most cases, states determine the legal status of contests with cash prizes by examining whether the activity is based on skill (like playing in a bowling tournament) or chance (like pulling the arm on a slot machine). Many activities are a mix of both, of course, and states have different thresholds for how much chance is acceptable before something becomes gambling. For Schneiderman, season-long fantasy sports are tolerable in part because they involve long-term strategy over several months. Daily fantasy games can turn on a single play.