DraftKings and FanDuel have temporarily settled their dispute with the New York Attorney General’s Office by agreeing to stop taking entries in the state through September.
The sites agreed to stop taking entries while it waits for appeals to be heard on the case—scheduled for September.
“As I’ve said from the start, my job is to enforce the law, and starting today, DraftKings and FanDuel will abide by it,” Attorney General Eric Schneiderman said in a press statement.
Though not named in Schniederman’s suit to close the two sites, fantasy provider Yahoo also announced it will stop taking DFS entries in the state as well until the matter is settled by the courts.
The settlement also comes as the state Legislature considers several introduced bills to legalize and regulate the industry in New York, however, none have moved beyond introduction as of yet.
“The agreement we’ve entered into today preserves the appeal and provides that the issue of the legality of daily fantasy sports will either be resolved in Albany, or we will return to court,” Schneiderman said in a press statement.
New York’s Republican-controlled Senate recently backed regulating daily fantasy sports by including it in its recent budget proposal. State Senator John Bonacic, heads the Senate budget committee and has introduced a bill to regulate the industry,
In the Democrat-controlled Assembly, J. Gary Pretlow, who chairs the committee with gambling jurisdiction, told the Associated Press, that he expects daily fantasy sports to be legalized in the state, but time is needed to craft an acceptable bill.
“I don’t have enough time to go through all of the nuances that we have to do because we want to do this right,” Pretlow told the AP. “We have until actually the end of the session to come up with a bill. I’m pretty sure the governor will sign it once we do it. But I don’t want to just look at what the fantasy industry has offered or suggested. We want to do our own bill. It’s going to be something that is fair for all parties concerned.”
Schneiderman sued the two DFS providers in November, sending both cease-and-desist letters ordering them to stop taking entries from New York players. Schneiderman said daily fantasy sports are illegal under New York law and constitute sports betting.
Although a court ruled in Schneiderman’s favor and ordered the site’s to close pending a full judicial hearing, the two companies have been allowed to operate in the state through an appeal. That appeal has been scheduled to be heard in September.
The case is the most high-profile challenge to the industry, which maintains that DFS is a game of skill, not gambling. However, several other state attorneys general have also ruled the games are gambling and illegal in their states.
In a statement, DraftKings told the Associated Press that company officials will continue to work with state legislators to find a way to allow fantasy sports to operate in the state.
FanDuel also released a statement.
“We are announcing that as of today, FanDuel will cease offering paid contests in the state of New York per the terms of a settlement reached with the Attorney General on certain aspects of the ongoing litigation,” the statement said. “New York is a critical state for FanDuel. FanDuel is headquartered in Manhattan, where we employ more than 170 young smart, passionate fans who are committed to innovating and providing the best fantasy experience possible.
“We are proud to be one of New York’s largest startup companies, and 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, the fantasy industry and our players while we continue to pursue legal clarity in New York,” the statement said.
The uncertainty of legal challenges around the country has hurt the industry and led to some payment processing services to balk at processing payments in states where the industry’s legality is being questioned.
In other developments:
Indiana became the second state, after Virginia, to legalize DFS. Governor Mike Pence signed the bill last week that mirrors Virginia’s $50,000 licensing fee, and other details of legalization.
The Fantasy Sports Trade Association released a statement: “Today’s news out of Indiana marks another important step in the ongoing process of creating legal clarity for fantasy sports. Momentum continues to build across the country—with more and more states enacting legislation that will allow millions of fans to continue to enjoy all the fantasy sports games they love. Throughout this process, the FSTA will continue to advocate for registration fees that neither inhibit new business nor hurt smaller fantasy sports operators. The FSTA will continue to work toward these goals when Indiana examines its regulatory rules in a legislative study this summer.”
In Minnesota, a bill to regulate daily fantasy sports sites received a hearing before a state House of representatives committee. The bill declares daily fantasy sports a game of skill and sets a minimum age limit of 18. The bill, however, does not require the sites to register and pay a fee to Minnesota.
Representative Tim Sanders, sponsor of the bill, told the committee he feels registration fees being required by other states are exorbitant, but that he would be open to adding more consumer protections.
In Maryland, the state Senate approved a pair of bills that would set a voter referendum in November’s election to determine whether daily fantasy games should be legal. If the referendum doesn’t pass, such games would be illegal starting in 2017.
The bill now moves to the state House of Delegates for consideration.
In Iowa, Senate File 155 would legalize daily fantasy sports for the estimated 300,000 residents who play the games. The legislation would bring DFS under the regulation of the Iowa Racing and Gaming Commission and would impose a 7.5 percent tax on revenue generated by the gaming companies after paying out prizes.
Supporters said they’re helping Iowans who want assurance the games are legal. But opponents, including other gambling operations, said the sites should be treated like traditional casinos, which pay a graduated rate on revenue and free promotional play. Jeff Boeyink, a lobbyist for SCE Partners LLC, developer of the Hard Rock Hotel and Casino in Sioux City, said, “We would prefer that this activity, this gaming activity is taxed the exact same way that we tax gambling at our facilities so there’s never a situation where you could price these differently for consumers because there’s a tax advantage of one form of gambling over another form of gambling.”
Last year, the Iowa Senate approved similar legislation which did not clear the House. However, the DFS measure cleared the House Committee on State Government and was sent to the tax-writing Ways and Means Committee where a subcommittee recently approved it. Next stop will be the full committee.
In Missouri, Senate Bill 1131 would tax daily fantasy sports companies at the same rate—21 percent—as casinos are taxed. An age limit of 21 years also would be added.
In February in the Oklahoma legislature, tribal interests have successful stopped the progress of daily fantasy sports bills. The Oklahoma Fantasy Contests Act, which would establish DFS online betting in the state but also end up violating gambling compacts. Bill sponsor state Senator David Holt said the bill has been dropped for now. Osage Nation Principal Chief Geoffrey Standing Bear and Cherokee Nation Bill John Baker both opposed the measures. In fact, Standing Bear wrote, “Fantasy sports are online internet contests such as fantasy football leagues. Substantial money is played during these games and the proposed legislation of the State of Oklahoma would bring money to Oklahoma State Government and exclude the tribes.” Baker wrote a letter praising the bills’ defeat, noting it is “clear that we will be fighting this legislation again in the future.”
In Arizona, the Senate Rules Committee killed S 1515 earlier this year. However, it, or a version of it, could be reintroduced soon. The Arizona Indian Gaming Association has blocked fantasy sports legislation in the past. In a website dedicated to opposing the DFS bill, the AIGA contends passing the legislation would nullify gaming compacts.
In California, the assembly passed a DFS regulatory bill but after two months it has not been taken up in the Senate. Observers blame tribal interests who have written letters to key lawmakers about the DFS bill, questioning its legality under state law.
And in Florida, DFS measures, while making some progress, became entangled with the Seminole gaming compact and ultimately failed.
The Wisconsin legislature adjourned without considering DFS regulations since the tribes did not support it.
And the Maryland Senate last week unanimously passed two bills that could decide the future of daily fantasy sports in the state, and which could be used as a model for other states.
By votes of 46-0, the senators passed two DFS bills. One would create a voter referendum for the November ballot that would ask whether or not daily fantasy sports should be legal. That bill contains a framework of regulations for DFS should voters decide to legalize and regulate it. The other bill would expressly make DFS illegal in the state beginning in 2017 if that is the result of the voter referendum.
The bills now go the House of Delegates for consideration.
In Maryland, however, lobbyists claim daily fantasy websites are already legal, under a 2012 law that legalized season-long fantasy football pools. DFS is an outgrowth of these contests, in which bettors wager on their fantasy rosters for individual games.
The Fantasy Sports Trade Association issued a statement last week calling the Maryland senators “out of touch with their constituents and the larger trend throughout the country.”
“We urge the Maryland Senate to reverse course and find common sense regulation that supports businesses and innovation and keeps all forms of fantasy sports available to the millions of players in Maryland who enjoy it,” the statement said.
The bills stemmed from an advisory opinion issued by the Maryland Office of the Attorney General in January that stated it is unclear whether or not the 2012 law covers season-long fantasy pools.
