Photographer: Zia Morales/Bloomberg

N.Y. to Press Daily Fantasy Sports Case Despite New Law

  • Attorney general says he’ll still pursue fraud claims
  • State legislature approves measure legalizing daily games

New York Attorney General Eric Schneiderman said he’ll keep pursuing claims that fantasy-sports companies DraftKings Inc. and FanDuel Inc. deceived consumers through false advertising, after the state passed a law making their operations legal.

With state lawmakers voting Saturday to authorize daily fantasy-sports contests, Schneiderman will no longer have a claim that the companies are operating illegally and should be forced to shut down. A successful suit for false advertising and consumer fraud could carry monetary penalties.

“The Legislature has amended the law to legalize daily fantasy sports contests, a law that will be my job to enforce and defend,” Schneiderman said Saturday in a statement posted to his office’s website. “We will nevertheless continue to pursue our claims that DraftKings and FanDuel previously engaged in false advertising and consumer fraud.”

Lawmakers approved daily fantasy-sports contests after weighing for months whether the business constituted illegal gambling. DraftKings and FanDuel in March suspended its contests for New York residents as they awaited new rules. The companies argued that their offerings are legal because they’re games of skill rather than chance. Governor Andrew Cuomo has not yet signed the bill.

Schneiderman had previously left open the possibility that he would go ahead with his false-advertising claims even if daily fantasy games were legalized.

Resume Play

“We are optimistic that today’s victory will allow New Yorkers to resume play soon and look forward to working with Governor Cuomo to approve the measure,” FanDuel said Saturday in an e-mail to its customers. The e-mail didn’t mention Schneiderman’s statement.

Sabrina Macias, a DraftKings spokeswoman didn’t immediately return a call and e-mail for comment on Schneiderman’s vow to press his case. Justine Sacco, a FanDuel spokeswoman, declined to comment.

New York-based FanDuel and Boston-based DraftKings also face consumer lawsuits alleging they duped players into participating in illegal gambling. The cases, which include false-advertising claims, have been consolidated before a federal judge in Boston for pre-trial information exchanges.

The decision to legalize fantasy sports in New York doesn’t mean DraftKings and FanDuel are off the hook for their earlier operations, said Hunter Shkolnik, one of the lawyers leading the consumer suits.

‘Wild West’

“It was the Wild West before and now they are going to have some reasonable limitations on what they can do,” he said in an interview Saturday. “But they are still culpable for their actions prior to the Legislature’s decision to legalize fantasy sports.”

Massachusetts Attorney General Maura Healey in November announced strict regulations that will allow the sites to operate in the Bay State, with restrictions such as barring players under 21 years old and banning advertising on college campuses. Other states, such as Tennessee and Colorado, also legalized fantasy sports this year.

The two companies, which offer nearly identical products and spend a lot of resources competing, are in talks about a merger, people familiar with the matter said this week. DraftKings has previously said Schneiderman “does not understand fantasy sports.”

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.

The consolidated civil case is In Re Daily Fantasy Sports Marketing and Sales Practices Litigation, MDL No. 2677, U.S. District Court, District of Massachusetts (Boston).

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