As one analyst told the Associated Press, the big question for many fantasy sports companies right now is “Should I stay or should I go?”
As the industry faces increased scrutiny—and the two biggest daily fantasy sites await a court decision on whether they will be banned in New York—other fantasy companies are scrambling to react.
“The industry is pretty fragmented on the ‘should they stay or should they go’ issue,” Chris Grove, editor of the Las Vegas-based Legal Sports Report, told the Associated Press. “A real schism has opened up.”
Since FanDuel and DraftKings have not significantly changed their business approach—although FanDuel has stopped taking entries from New York players—the movements of some smaller companies has not had a large impact on the industry, the AP concluded.
But the reactions are telling.
DraftKings and FanDuel have vowed to fight to stay operating. The two companies both challenged a ruling by New York Attorney General Eric Schneiderman that would ban the sites from the state. Their challenge is awaiting a preliminary decision from state Supreme Court Judge Manuel Mendez who has said he will work quickly to render a decision.
In the case of a company like Yahoo, however—known more for season-long fantasy sports, but which recently began daily fantasy sports—the reaction has been a more cautious state-by-state response.
For example, the company has withdrawn its DFS games from Florida, where a federal grand jury is looking at whether daily fantasy sports games violate state law. FanDuel, DraftKings and a number of others still operate there, the AP report noted.
Yahoo, however, has not pulled out of New York, despite reports that Schneiderman’s office is also looking at their operations.
CBS Sports is another major provider of season-long fantasy sports and introduced daily fantasy sports earlier this year. But the company elected not to offer daily fantasy football contests.
Amaya-owned StarDraft may be the most extreme example, offering daily fantasy sports only in Massachusetts, Kansas, New Jersey and Maryland, where it feels the games are permitted. .
Eric Hollreiser, Amaya’s vice president of communications, told the AP that the company is simply taking the long view.
“We aren’t ceding anything to competitors,” he says. “We’re running a marathon and won’t compete in the expensive marketing sprint the others are running.”
Smaller daily fantasy sports-centered startups are also reacting.
According to the AP, Mondogoal, a U.K. daily fantasy sports company focused on professional soccer, has pulled out of seven states so far. Founder Shergul Arshad, a Massachusetts residents, told the news service he’s considering completely exiting the U.S.
Star Fantasy Leagues chief operating officer Seth Young told the AP that the New York-based company has already pulled out of 25 states because it concluded the risks were too great after examining local laws. Instead, the 3-year-old company has pivoted to focus on developing daily fantasy sports platforms for other operators, such as state lotteries, he said.
“We’d rather see the clarity and re-enter,” he told the AP. “Otherwise, we’ll focus our attention elsewhere.”
In some other developments:
The decision on the potential New York ban will depend in the court finds daily fantasy sports to be “unlawful” gambling, DraftKings attorney David Boies said in a conference call with reporters.
Boies compared daily fantasy’s picking of athletes to legally allowed skill games such as mahjong and video games.
“It’s a question of whether it’s unlawful gambling,” he said according to various reports.
Boies said DraftKings does not plan to close down in New York until a court orders it too.
“All we are doing is continuing the status quo, we’re not making any changes, until the legal process plays itself out,” he said. “From DraftKings standpoint, DraftKings has believed this is the right decision for the company, its employees, its investors and its customers.”
DraftKings has also rebutted allegations by Schneiderman that it collected nearly $500,000 in entry fees from players in five US states where daily fantasy sports games are considered banned.
In a court filing, DraftKings said its data analysts found 250 players whose accounts were in some way associated with the states of Washington, Montana, Louisiana, Iowa, and Arizona where DFS sports are banned.
The company found that most of the nearly $485,000 in disputed fees from 2014 proved to be from players who actually lived in other states where daily fantasy sports is permissible. The filings suggest that players may have moved, had residencies in multiple states, or even mistakenly filled out their online registration forms according to a report in the Boston Globe.
