FanDuel, DraftKings Agree to Stop Paid Contests in New York

  • Business in N.Y. can resume if state Legislature allows it
  • Accord would delay and might end illegal gambling litigation

FanDuel Inc. and DraftKings Inc. won’t let New York residents enter paid daily fantasy sports contests under an agreement with state Attorney General Eric Schneiderman that might end lawsuits over his claims that the businesses constitute illegal gambling.

Four months after suing to block the operations, Schneiderman said an agreement with the two companies announced Monday is what he wanted from the start.

“New York is a critical state for FanDuel,” the Manhattan-based company said in an e-mailed statement. “While it is disheartening for us to restrict access to paid contests in our home state, we believe this is in the best interest of our company.”

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 said. California is the No. 2 market, with 10 percent, it says.

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

‘My Job’

“As I’ve said from the start, my job is to enforce the law, and starting today DraftKings and FanDuel will abide by it,” Schneiderman said in a statement.

If the state Legislature approves a bill authorizing daily fantasy sports, the sites will be able to take New York entries again. Regardless of that outcome, Schneiderman may still go ahead with false-advertising claims and investigations of other potential consumer-protection violations, according to the agreement.

Momentum is building behind proposals that would legalize the sites. State Senator John Bonacic, a Republican who chairs the Racing, Gaming and Wagering committee, has put forward a bill and has called interactive fantasy sports regulation “one of my budget priorities.”

Lawmaker’s Statement

“The announcement of the settlement today between the Attorney General and two of the largest fantasy sports operators brings this issue to the forefront, and I look forward to working with my colleagues in the Senate and Assembly, and the Governor, to see it addressed during the budget process,” Bonacic said Monday in a statement.

The Assembly’s Racing and Wagering Committee chairman, Democrat J. Gary Pretlow, may introduce his own bill to legalize and regulate daily fantasy sports, said his racing legislative analyst, Kaitesi Munroe.

For at least the time being, New York becomes the ninth state where DraftKings won’t accept paid entries. FanDuel has ended paid games in 10 states. The two companies took separate routes in Texas.

In a statement e-mailed by an outside spokesman, Boston-based DraftKings said it will “continue to work with state lawmakers to enact fantasy sports legislation so that New Yorkers can play the fantasy games they love.”

Skill or Chance?

In lawsuits filed last year, Schneiderman alleged that daily fantasy sports are games of chance whose participants have no control over the outcome, making them illegal under state law. The companies say they are contests of skill determined by players’ research, experience, knowledge and savvy.

In daily fantasy sports contests, players choose a roster of athletes who earn points based on their performance in real games. The entries usually cost from less than $1 to thousands of dollars, with payouts sometimes exceeding $1 million to the winner.

The sites have come under scrutiny by a number of states over allegations they violate state laws prohibiting gambling.

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

Related tickers:
0249680D US (FanDuel Inc.)
0564694D US (DraftKings Inc.)

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