New York Cracks Down on Fantasy Sports Sites

The state's attorney general says daily fantasy games offered by DraftKings and FanDuel "easily meet the definition of gambling."
Matthew HellerNovember 11, 2015

In a significant setback for the fantasy sports industry, New York’s attorney general has ordered DraftKings and FanDuel to stop accepting bets from New York residents, saying their operations amount to illegal gambling.

Fantasy sports companies argue that their games are not gambling because they involve more skill than luck and are allowed under a 2006 federal law that exempted fantasy sports from a prohibition against processing online financial wagering.

But in cease-and-desist orders sent on Tuesday to DraftKings and FanDuel, two of the biggest daily fantasy sports companies, New York Attorney General Eric Schneiderman said their games “easily meet the definition of gambling.”

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“Our investigation has found that, unlike traditional fantasy sports, daily fantasy sports companies are engaged in illegal gambling under New York law, causing the same kinds of social and economic harms as other forms of illegal gambling,” he said in a news release.

Scheiderman’s move could have national implications.

“Given the New York attorney general’s historic role as a consumer-protection advocate, legal experts said the action was likely to reverberate in other states where legislators and investigators are increasingly questioning whether the industry should operate unfettered by regulations that govern legalized gambling,” The New York Times reported.

DraftKings and FanDuel can challenge the attorney general’s orders in court. Under New York law, “a person engages in gambling when he stakes or risks something of value upon the outcome of a contest of chance or a future contingent event not under his control or influence.”

Joseph M. Kelly, a professor of business law at the State University College at Buffalo, said the state would have to prove that chance is a material factor in daily fantasy sports, which would make it gambling.

“Fantasy sports is a game of skill and legal under New York state law,” FanDuel said in a statement. “This is a politician telling hundreds of thousands of New Yorkers they are not allowed to play a game they love and share with friends, family, co-workers and players across the country.”