In the continuing drama surrounding Daily Fantasy Sports (DFS), New York's Attorney General Eric Schneiderman responded to lawsuits by DraftKings and FanDuel by seeking a preliminary injunction to halt their operations in the state.
Following news reports of insider trading and multiple lawsuits, the New York AG sent cease and desist letters to the two largest DFS sites. In response, DraftKings and FanDuel filed suit against the AG's office seeking a temporary restraining order, a move denied by the court.
Schneiderman fought back with his own lawsuits against the two sites in which he reiterated his reasoning that DFS constitutes gambling under New York law. "DFS is nothing more than a rebranding of sports betting," according to the complaint against DraftKings. "It is plainly illegal."
According to the AG, the games at issue are based on chance, not skill, and the outcomes depend on events over which participants have no control. "The moment a DFS player submits a wager, he becomes a spectator whose fate is sealed by the real-game performance of athletes. A player injury, a slump, a rained out game, even a ball taking a bad hop, can each dictate whether a bet wins or loses."
Traditional fantasy sports—which fall under an exception in the Unlawful Internet Gambling Enforcement Act—differ from DFS due to its competitive draft and the ability of the participants to trade, drop, and add players, and change lineups, Schneiderman said. He emphasized the "substantial control" participants have over how the league is administered and scored. By contrast, DFS games run on a daily and weekly basis. They allow no trading or adjusting of lineups, they do not make use of a competitive draft format, and they lack the significant strategy inherent in traditional fantasy leagues.
"Rather than a new type of fantasy league, DFS simply devised another way to bet on sports," the AG said. "A DFS lineup is a parlay bet in which the relevant variables are the athletes."
Advertising by DraftKings contributed to the problem with its "promises of easy riches for a lucky few sports fans," the AG wrote. "It's the simplest way of winning life-changing piles of cash" and "They make winning easier than milking a two-legged goat" were typical examples. DraftKings also embedded key words related to gambling in the code on its website that led search engines to return to the site when consumers searched for terms including "fantasy golf betting" and "daily fantasy basketball betting."
The AG contends that DFS presents a serious and growing threat to those with gambling-related illnesses, particularly young males, and notes that numerous players have allegedly called the company's customer service to cancel their accounts "and to plead with DraftKings to permanently block them from playing." Accordingly, the AG's enforcement actions request a preliminary injunction against both DraftKings and FanDuel.
To read the complaint in New York v. DraftKings, click here.
To read the complaint in New York v. FanDuel, click here.
Why it matters: The battle over DFS continues, and these lawsuits are just the latest salvo in the campaign to declare daily fantasy sports illegal gambling. No matter the outcome, the impact on DFS has been significant. Other states are considering following New York's lead (including a proposal from the Massachusetts Attorney General that would ban DFS in the state for participants under the age of 21 and prohibit college sporting events as the basis for DFS competition). The companies have significantly pulled back on their multimillion-dollar ad campaigns.