FanDuel and DraftKings were just shut down in New York, a costly blow for the billion dollar daily fantasy sports industry as it comes under greater scrutiny nationwide.
It means players in New York will be out of luck, but it appears they will get to keep their winnings.
On Tuesday, New York attorney general Eric Schneiderman declared that these sites quality as illegal gambling, ESPN reported. The state sent cease-and-desist notices to game operators DraftKings and FanDuel an demand they stop accepting money from New York residents.
The move is a costly blow to these sites, which have tried to argue that they are games of skill. Schneiderman disagreed, saying in a letter to these operators that “each DraftKings/FanDuel wager represents a wager on a ‘contest of chance’ where winning or losing depends on numerous elements of chance to a ‘material degree.’ “
— New York Daily News (@NYDailyNews) November 10, 2015
FanDuel responded immediately, saying it was a politically motivated move.
“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, coworkers and players across the country. The game has been played — legally — in New York for years and years, but after the Attorney General realized he could now get himself some press coverage, he decided a game that has been around for a long, long time is suddenly now not legal. We have operated openly and lawfully in New York for several years. The only thing that changed today is the Attorney General’s mind.”
New York attorney general rules DraftKings & FanDuel constitute illegal gambling, orders sites to stop taking bets https://t.co/E8KNSKTRhk
— Bleacher Report (@BleacherReport) November 11, 2015
This is not the first time that FanDuel and DraftKings have been shut down. Last month, regulators in the state of Nevada ordered all daily fantasy sports sites to shut down, declaring that they would need a gambling license to operate in the state.
Nevada’s would likely have a devastating effect on these DFS sites, Fox News noted.
“The decision comes amid growing backlash by investigators and regulators over the sites, which have grown in popularity in the past year, and could cause ripples in other states that have questioned their legality. Regulators elsewhere often watch decisions made by Nevada’s Gaming Control Board since it governs Las Vegas area casinos.”
There could be more trouble ahead for daily fantasy sports sites. Nevada Senator Harry Reid, a former Nevada Gaming Commissioner chair, said last month that these sites would come under greater congressional scrutiny.
“We learned yesterday… that there’s absolutely scandalous conduct taking place with those programs — fantasy sports,” Reid was quoted by The Huffington Post in response to a question about whether the sites should be more strictly regulated. “So the answer is yes, and I think it should also be a warning shot to everybody that online gaming is a real scary thing and we’d better look at all of it.”
For New York residents who have used — and won money from — DraftKings and FanDuel, it appears their winnings are safe. The state does not appear motivated to take back earnings from before the ruling.
The next step for DraftKings and FanDuel after being shut down in New York appears to be more of a fight. DraftKings had already hired former U.S. attorney John Pappalardo to lead an investigation of the gambling allegations, and ” FanDuel has asked former U.S. Attorney General Michael Mukasey to review its internal controls.
[Image via DraftKings.com]