Attorney General Eric T. Schneiderman has called them each an “unlawful gambling business” operating in his state.
DraftKings, Inc. and FanDuel, Inc. have called Schneiderman’s collective actions against them a “strong-arm campaign of coercion.”
With no agreement in sight, both sides have taken action against one another, one in attempt to ensure its future in New York, the other to ensure its demise in the Empire State.
Schneiderman filed suit on Dec. 31 against both Boston-based DraftKings and New York-based FanDuel, ordering the fantasy betting sites to return to customers $200 million they have earned in entry fees from daily fantasy games since they began operating in New York in 2012.
The suit, which follows the attorney general”™s cease-and-desist order sent to the companies in November, also calls on the sites to pay fines of up to $5,000 each.
Both companies on Jan. 4 countered with motions to continue business in New York during a stay of injunction by an appeals judge last month.
David Boies, an attorney representing DraftKings, said that of the roughly 2.5 million total players in the company’s contests, 375,000 customers, or 15Â percent, are in New York. As of Nov. 16, New York customers had paid more than $99 million in entry fees in 2015, which generated more than $10 million in revenue.
In a Jan. 4 brief, Boies, the chairman of Armonk law firm Boies, Schiller & Flexner LLP, argued that DraftKings would lose millions of dollars in revenue should it be forced to cease business in New York as well as would see its business partnerships with the New York Yankees, New York Mets, New York Giants and the New York Knicks harmed.
“Should DraftKings cease operations in New York, it will suffer severe economic harm with no ability to recover damages from the NYAG,” Boies said in his brief.
In its November daily fantasy sports industry update, Eilers & Krejcik Gaming, LLC, a California firm that tracks the gaming sector, said New York accounts for 12.8 percent of the industry’s national figures, making it the most popular state for the game. It estimated FanDuel and DraftKings generated between $35 and $40 million in New York in 2015.
Schneiderman alleges the gaming companies violated several penal laws, including promoting gambling in both the first and second degree, possessing gambling records while operating a bookmarking enterprise, false advertising and several business laws, which gives Schneiderman the authority to shut the companies down.
He also alleges the companies have engaged in fraud stemming from the misrepresentation of the degree of skill in games, deposit bonuses, likelihood of winning a jackpot and the labeling of games as something other than gambling.
Schneiderman launched an investigation into both companies in October after allegations surfaced that employees of the website used information to gain an advantage in winning fantasy games. A cease-and-desist letter was delivered to both companies on Nov. 10, which sparked a series of legal battles that began in state Supreme Court in Brooklyn and have now made their way to the appellate division of state Supreme Court in Manhattan.
After state Supreme Court Justice J. Mendez on Dec. 11 granted Schneiderman’s preliminary injunction to block either companies from accepting entry fees, wagers or bets in New York, a successful appeal allowed the competitors to continue business during the stay of injunction. The recently amended lawsuit he first filed in November was amended earlier this month.
“DraftKings exploits the good will associated with this game,” Schneiderman said in the suit. “Unlike the season-long competition played mostly for bragging rights or side wagers, DraftKings runs a casino-style gambling operation.”
Contestants can choose between either daily fantasy sports contests, which can last from a day to a week, or season-long fantasy sports, where they assemble teams and “own” players at certain positions for the length of the season. Throughout the season, “owners” can alter lineups; assign positions; and trade, release and sign players, which most involved in the case seem to agree involves a greater level of skill than daily games.
The companies offer daily contests involving National Football League, Major League Baseball, National Hockey League, National Basketball Association, Professional Golfers’ Association, Mixed Martial Arts and other competitions. Schneiderman has argued that daily games equate to gambling rather contests of skill, as attorneys representing the two fantasy juggernauts have contended.
Bob Hyland, owner of Bob Hyland’s Sports Page Pub in White Plains, said the majority of his customers who do participate in fantasy sports play the season-long variety. Almost 40 leagues, each with roughly 10-to-12 participants each, held their draft parties at his pub before the start of this past NFL season.
Hyland, whose business features a football player reading a newspaper as its logo and beer and wings specials on football game days, said he didn’t imagine that business would be hampered by daily fantasy sites being barred in the state.
“It could affect us somewhat if we feel there’s not as much buzz generated if you can’t play these games,” he said, adding he agreed that daily fantasy games equated to gambling. “It’s beneficial to us. When you’re sharing the game here with people on Sundays there’s a bit of electricity and there’s a lot more fun.”
He’s seen a change in the way people have watched games as well, which makes his bar’s surplus of TV’s all the more beneficial.
“People go from one television to the next. We have people coming in who aren’t focused on one team or even just one player  ̶  they’re focused on one player in several different games,” he said. “It’s amazing how many hours guys and girls put into their teams. Anything that makes the game more interesting we’re definitely for.”
Though fantasy sports games date back more than five decades, but have taken off exponentially in recent years. According to Schneiderman, daily fantasy sports players wagered more than $25 million on DraftKings in 2014.
Both FanDuel”™s and DraftKings’ advertising has grown exponentially this year, including noticeable billboards plastered over professional sporting venues and advertisements shown on ESPN, CBS and other outlets.
DraftKings allegedly spent $81 million on television commercials that aired more than 22,000 times between August 1 and September 14, according to Schneiderman.
DraftKings and FanDuel have also filed suit in Illinois, where that state’s attorney general, Lisa Madigan, said this fall that the companies’ daily contests “clearly constitute gambling.”
