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FanDuel and DraftKings Receive Cease-and-Desist Letter from NY AG

The office of New York’s attorney general fired off cease-and-desist letters to FanDuel and DraftKings fantasy sports websites.

Tuesday’s letters conclude that FanDuel and DraftKings’ “operations constitute illegal gambling under New York law.” The nearly identical missives order the sites to cease accepting money from residents of the Empire State.

“FanDuel’s customers are clearly placing bets on events outside of their control or influence, specifically on the real-game performance of professional athletes,” the attorney general’s office holds. “Further, each 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 Attorney General Eric Schneiderman launched an investigation into the sites in early October after the New York Times published a report alleging that a DraftKings employee may have received inside information before winning on the rival FanDuel site. An internal investigation by DraftKings denied the allegations by noting the employee made his picks prior to the availability of the information. A law firm employed by DraftKings to investigate the matter concluded that the employee “could not possibly have entered the winning lineup based upon his receipt of the Company’s nonpublic aggregate ownership percentage information, because he did not receive that information until 40 minutes after the lineup was locked.”

New York’s attorney general classifies the websites as threats to public health and holds that 99 percent of the contestants miss out on the riches claimed by the top one percent of players.  The “top one percent,” Kathleen McGee, the AG office’s internet bureau chief, points out, “receive the vast majority of the winnings.”

New York runs a state lottery and allows gambling on horse racing. The state houses numerous Indian gaming venues. In 2013, New York voters approved of casino gambling. But the letter from the AG’s office distinguishes FanDuel and DraftKings from other wagering: “Certain structural aspects of DFS make it especially dangerous, including the quick rate of play, the large jackpots, and the false perception that it is eminently winnable. Ultimately, it is these types of harms that our Constitution and gambling laws were intended to prevent in New York.”

While DraftKings operates out of a ritzy section of Boston near the Public Garden, FanDuel calls Union Square in Manhattan home.

“FanDuel DFS contests are neither harmless nor victimless,” the attorney general’s office maintains. “Daily Fantasy Sports are creating the same public health and economic concerns as other forms of gambling, including addiction. Finally, FanDuel’s advertisements seriously mislead New York citizens about their prospects of winning.”

 

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