New York Daily Fantasy Players in Game for NBA, NHL Playoffs

  • Appeals court allows fantasy sports sites to keep operating
  • State attorney general sought to shut them down during suit

Daily fantasy sports players won’t be shut out of the National Basketball Association and National Hockey League playoffs after a state appeals court allowed the two biggest sites to continue operating while they fight the attorney general’s claim that they’re illegal gambling operations.

A panel of state appellate judges on Monday put a hold on a December ruling ordering DraftKings Inc. and FanDuel Inc. to stop accepting deposits from players in the state until their dispute with Attorney General Eric Schneiderman, who is seeking an order closing the sites permanently, is resolved.

Monday’s decision means the two sites can continue operating in New York until the appeals court rules on whether to overturn Justice Manuel Mendez’s decision, which could come weeks or months after a hearing set for the May term. That would allow players to enter lineups for the NBA and NHL playoffs, which begin in April, as well as the start of the Major League Baseball regular season and the annual college basketball tournament known as March Madness.

“We’re very grateful to the courts for continuing the stay for the duration of the appeal so that the hundreds of thousands of New Yorkers who love daily fantasy sports can continue to enjoy these contests,” said Randy Mastro, an attorney representing DraftKings.

Shutdown Ordered

Mendez on Dec. 11 ordered the sites to close while they fight Schneiderman, saying the attorney general was likely to succeed on the merits of his case and that there was a need to protect the public, particularly those with gambling addictions. Mendez noted that his ruling wasn’t the final determination and asked the parties to submit more evidence. An appellate court judge later that day put Mendez’s ruling on hold pending the outcome of the appeal. That was extended by the broader panel Monday.

"We look forward to demonstrating to the appellate division that the trial judge was correct," Damien LaVera, a spokesman for Schneiderman, said in a statement. "DraftKings and FanDuel are indeed operating illegal gambling operations in New York and should be permanently barred from doing business in New York.”

Biggest Market

According to a 2015 poll of players, New York has the biggest U.S. market for daily fantasy sports, with 13 percent of participants, said Eilers & Krejcik Gaming LLC, a research company in Anaheim Hills, California. Losing them would cost the companies an estimated $35 million a year, Eilers says. California is the No. 2 market, with 10 percent, it says. 

Those statistics represent active players, while FanDuel and DraftKings say in filings that according to a list of open accounts New York represents less than 10 percent of the U.S. market.

“We are confident that fantasy sports have always operated lawfully in New York, but we do believe that new, common-sense regulations to protect consumers and reflect the evolution and growth of the game are needed," FanDuel said in a statement. "The New York legislature, like many states around the country, is working towards such regulation, and we will work with them to achieve it.”

At least six states have banned daily fantasy sports, and others are considering regulating the contests. DraftKings on Dec. 24 asked an Illinois court to overturn a finding by Attorney General Lisa Madigan that the games are illegal gambling.

Massachusetts Attorney General Maura Healey’s office scheduled public hearings on its proposed daily fantasy sports rules for Tuesday in Boston. The state is also accepting public comments until Jan. 22.

Upped Stakes

The New York attorney general upped the stakes in the fight with the fantasy sites on New Year’s Eve, demanding the return of all money to users who lost in 2015, plus fines.

While the fantasy sites said they raked in $200 million from New York-based players, they collect a percentage of the bets while the players compete for the rest of the pot. According to the website Fantasy Sports Leader, FanDuel’s take ranges from 10 percent on $1 to $50 buy-ins to 6.5 percent on buy-ins of $535 in general leagues.

In daily fantasy sports games, a player assembles a roster of athletes and wins or loses based on their real-life performances on a game day, with some contests offering prizes in the millions of dollars.

Schneiderman says the business constitutes illegal gambling under state law because the outcome of the contests depends mostly on chance and factors outside of a player’s control.

Skill Games

The sites argue that their games are contests of skill, in which players act as de facto general managers and select teams that don’t exist in real life.

FanDuel voluntarily stopped offering contests in the state shortly after Schneiderman issued cease-and-desist orders to the companies in November. It opened the contests to New Yorkers after the appeals court’s temporary lifting of the ban. DraftKings let New Yorkers play throughout the fight with the attorney general.

The cases are FanDuel Inc. v. Schneiderman, 161691/2015; DraftKings Inc. v. Schneiderman, 102104/2015; People v. DraftKings Inc., 453054/2015; and People v. FanDuel Inc., 453056/2015, New York State Supreme Court, New York County (Manhattan).

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