Daily fantasy sports fans in New York state are about to face a harsh new reality.
State Attorney General Eric T. Schneiderman on Tuesday ordered DraftKings and FanDuel, the two largest daily fantasy sports companies, to immediately stop accepting bets from New York residents. In cease-and-desist letters sent to both sites, Schneiderman said his office considers the companies' practices to be illegal gambling.
"Daily fantasy sports is neither victimless nor harmless, and it is clear that DraftKings and FanDuel are the leaders of a massive, multi-billion-dollar scheme intended to evade the law and fleece sports fans across the country," Schneiderman said in a statement. The sites are causing "the same kinds of social and economic harms as other forms of illegal gambling, and misleading New York consumers," Schneiderman added.
The daily fantasy sports industry generates millions in revenue, but is mostly unregulated. The industry has close ties to the NFL, which critics say is hypocritical, given the league's formal anti-gambling stance.
Neither FanDuel nor DraftKings suggested they would comply with Schneiderman's demand.
An outside public relations company working for DraftKings said the site would "vigorously pursue all legal options." The spokesman called Schneiderman's actions "hasty," saying the attorney general fundamentally misunderstands "why daily fantasy sports are clearly a game of skill."
FanDuel said in a statement that the company has "operated openly and lawfully in New York for several years. The only thing that changed today is the Attorney General's mind."
In October, an insider trading scandal brought heightened scrutiny to the industry and raised new questions whether daily fantasy sports contests are fair or even legal. Soon after that, the FBI and Justice Department announced a preliminary investigation into the industry.
Not everyone agrees whether playing daily fantasy leagues requires skill and knowledge -- or just plain luck.
Courts have said the use of statistics and knowledge of players' strengths and weaknesses constitutes a "skill," which sets fantasy leagues apart from other types of gambling, sports and entertainment lawyer Jaia Thomas told The Huffington Post last month:
The courts make a distinction between games of skill and games of chance. Under the courts and the law, games of skill are legal. Games of chance are deemed illegal. So courts have argued that fantasy leagues are games of skill -- that it requires some kind of skill, some kind of knowledge base to put these teams together and go about playing in fantasy leagues -- whereas with traditional sports betting, the courts have argued those are more games of chance that don't require any skill or knowledge base.
Arizona, Iowa, Louisiana, Montana, Nevada, and Washington state prohibit DraftKings, FanDuel and other daily fantasy sports sites from taking bets. New Jersey is considering legislation to regulate daily fantasy sports betting.
FanDuel and DraftKings have resisted claims that their websites are gambling. FanDuel has created an online petition encouraging customers to fight back.
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