In a season of difficulty, a New York judge last week dealt the cruelest blow to the daily fantasy sports industry, when he upheld a ruling by New York Attorney General Eric Schneiderman that the activity amounted to illegal sports betting and let the ban stand. While Manhattan state Supreme Court Justice Manuel Mendez didn’t make a final declaration on that question, he indicated he wanted to let the courts decide the legality of the games before allowing them to resume.
“The protection of the general public outweighs any potential loss of business,” wrote the judge in his opinion.
DraftKings—which had continued to operate in New York, while its rival FanDuel, had not—immediately filed an appeal to Mendez’s ruling.
David Boies, a lawyer for DraftKings, contends that DFS is legal and that the judge should have maintained the status quo while legal arguments played out.
FanDuel affirmed that it was on the same page with DraftKings.
“We remain committed to ensuring all fantasy sports are available to New Yorkers, and will work to bring our product back to sports fans around the state through our appeal and working with the legislature to enact sensible regulations for fantasy sports,” New York-based FanDuel said in a statement. “Today’s preliminary decision was wrong, and we expect we will ultimately be successful.”
Nonetheless, the chairman of a state legislative committee with authority over gambling said at a legislative hearing that he expects the state will move to legalize and regulate daily fantasy sports, despite the ruling.
Assemblyman J. Gary Pretlow, who leads the Committee on Racing and Wagering, did say, however, that lawmakers are waiting for the ruling to see how to proceed.
Now that the judge has ruled, Pretlow said the legislature would move to legalize DFS.
“We’re not here to litigate the legality of fantasy sports,” he said. “That is in the courts right now and regardless as to what the outcome of that case is, what we’re interested in is in regulations, licensure, consumer protection. Those are the issues we’re interested in for the state of New York.”
New York held the legislative committee hearing on DFS sites last week, and again lawyers for the two sites testified that daily fantasy sports are a game of skill and not gambling. Therefore they do not believe DFS violates the state’s laws, they said.
Both FanDuel and DraftKings have argued that most of their tournaments are won by a small group of highly skilled players, proving the games take skill to win. They also argue that players aren’t making a traditional bet, but instead entering a contest and competing for prizes.
Officials for the industry said again that they are willing to work with states to ensure proper consumer protections are in place.
New York Assemblyman L. Dean Murray, a Long Island Republican, said he himself plays daily fantasy sports as a form of entertainment and that he’s slightly ahead for the year, according to the AP.
Murray has introduced legislation to remove daily fantasy sports from New York’s definition of games of chance, and also to amend the state constitution to make an exception for daily fantasy sports from its general prohibition on gambling.
Other Developments
In Washington state, where fantasy sports are currently illegal, state Senators Doug Ericksen and Brian Dansel said they plan to introduce a bill to allow wagering without limit on all fantasy sports according to a report in Seattle Weekly.
“It is ludicrous that you can buy a lottery ticket in this state, pick through pull tabs at your local tavern, or spend an evening at the bingo hall or the card room, but you can’t draft a fantasy-football team. Huge numbers of Washington residents do it anyway,” Ericksen said in a press statement. “We need to see this as a weakness of state law.”
Also, South Dakota Attorney General Marty Jackley recently announced that the estimated 25,000 South Dakota residents who wager on daily fantasy sports each year will not face felony indictments. Jackley said he made that decision because state law is unclear whether fantasy sports are skill-based or are illegal. He said he hoped legislators would provide a clearer definition on the legality of daily fantasy sports betting. “I’m a strong believer that if you’re going to take away somebody’s liberty and freedom, you need to be satisfied the law is clear,” Jackley said.
Meanwhile, Jackley said South Dakota residents should be careful that they don’t violate other states’ laws, depending on the jurisdiction where the wager is received. He stated he may seek civil remedies through the courts and confer with other state attorneys general.
Governor Dennis Daugaard has said he considers daily fantasy sports wagering illegal gambling under South Dakota law. “I think it’s no more a game of skill than blackjack is a game of skill, and so if blackjack’s a game of chance, then I believe fantasy football should be considered a game of chance as well,” he said.
However, Griffin Finan, director of public affairs at DraftKings, last month told the state Commission on Gaming that fantasy sports is mostly based on skill, not chance, and therefore is legal in South Dakota. Finan said the company is pleased with the attorney general’s decision not to prosecute players and added DraftKings looks forward to working with Jackley and legislators. “We strongly agree that any government authority should review the facts and the relevant law very carefully before taking away one’s liberty and freedom to play the fantasy sports games they love and have been playing for years,” Finan said.
He added the industry may pursue legislation to clarify that fantasy sports are exempt from state gambling oversight and impose consumer protection measures on operators. The games are getting unusual attention this year following expenditures of millions of dollars on advertising by Boston-based DraftKings and New York-based FanDuel plus possible insider trading concerns.
Finally, former NBA commissioner David Stern defended the DFS industry at the Sports Business Journal Intercollegiate Athletics Forum in New York, according to a report in USA Today.
“The current issues around it are ridiculous,” Stern told reporters. “It’s clearly a game of skill.”
The NBA is currently partnered and invested in FanDuel, though that deal was struck with current commissioner Adam Silver. Stern also said states seeking to ban daily fantasy sports that also offer lotteries are hypocritical.
“You have an equal chance of winning the lottery whether you buy a ticket or you don’t,” Stern added.
