Judge: Daily Fantasy Operators DraftKings and FanDuel Out of Business in NY

DraftKings AP

On Friday, New York Supreme Court Judge Manuel Mendez disappointed players of fantasy sports in New York, as well as the NBA, MLB, and the NHL, by ruling daily fantasy operators DraftKings and FanDuel could not do business in new York.

Mendez granted a preliminary injunction to New York Attorney General Eric Schneiderman, who had argued the sites operated illegal gambling sites. Schneiderman posited that New York’s ban on bookmaking and other forms of sports gambling, instituted in 1894, precluded the two companies from doing business in his state. His memorandum stated, “So-called Daily Fantasy Sports (‘DFS’) wagers fit squarely in both these definitions, though by meeting just one of the two definitions DFS would be considered gambling. DFS is nothing more than a rebranding of sports betting. It is plainly illegal.”

Mendez agreed, rebuffing arguments from the fantasy operators that asserted that their clients did not transgress gambling statutes because players only submitted an entry fee, rather than wagers. Mendez wrote, “New York State penal law does not refer to ‘wagering’ or ‘betting,’ rather it states that a person, ‘risks something of value.’ The payment of an ‘entry fee’ as high as $10,600 on one or more contests daily could certainly be deemed risking ‘something of value.'”

DraftKings, based in Boston with a satellite office in New York, immediately filed an appeal, claiming Mendez “misapplied the law.” FanDuel, based in New York, also promised to appeal.

Schneiderman, delighted, stated, “We are pleased with the decision, consistent with our view that DraftKings and FanDuel are operating illegal gambling operations in clear violation of New York law. I have said from the beginning that my job is to enforce the law, and that is what happened today.”

David Boies, attorney for DraftKings, responded, “We are disappointed with the Court’s decision, and will immediately file an emergency notice of appeal in order to preserve the status quo. Daily Fantasy Sports contests have been played legally by New Yorkers for the past seven years and we believe this status quo should be maintained while the litigation plays out.”

The NBA has equity in FanDuel; MLB and the NHL own equity in DraftKings. FanDuel or DraftKings share advertising partnerships with virtually every NFL team. In October, Washington Redskins wide receiver Pierre Garcon filed a class-action lawsuit on behalf of NFL players against FanDuel.

Over 600,000 New Yorkers paying a total of over $200 million in 2015 have played daily fantasy on DraftKings and FanDuel.