DraftKings Sues New York Attorney General Over Daily Fantasy Sports Ruling

Eric Schneiderman ordered the company to cease operations in the state earlier this week.

DraftKings, the largest daily fantasy sports website, sued New York Attorney General Eric Schneiderman on Friday, three days after he ruled the company had violated state gambling laws and ordered it to cease operations in the state.

The suit from the Boston-based company asks New York's Supreme Court to vacate Schneiderman's ruling, which DraftKings says employed "strong-arm tactics" and violates the state constitution.

“Today, we have taken decisive legal action to prevent a unilateral, misinformed and legally misguided attempt by the New York Attorney General to act as 'judge, jury and executioner' for daily fantasy sports in New York," DraftKings said in a statement. "We are confident in our legal position and intend to continue to fight to preserve the right of the over 500,000 New York consumers to play the fantasy sports games they love.”

Schneiderman ruled that the contests were "games of chance" that were not permitted under state law. The ruling specifically singled out DraftKings as well as FanDuel, another daily fantasy sports company that also reportedly filed suit against Schneiderman on Friday. Neither company has heeded the attorney general's demand to bar New York residents from participating in their contests.

DraftKings argues in the suit that its contests are "games of skill," as defined by a 2006 federal law that prohibits most forms of online gambling but included an exception for fantasy sports, and are therefore "entirely legal under New York law."

The Nevada Gaming Commission ruled last month that daily fantasy sports contests constituted "gambling" and required licenses to operate in the state. Schneiderman's ruling, however, was an even bigger blow, in part because of the number of daily fantasy players in New York.

The companies have faced intense scrutiny since an "insider trading" scandal engulfed the daily fantasy industry this fall. Congress has considered holding hearings into the industry's practices, and the Department of Justice and FBI have launched an investigation into whether the companies have violated federal gambling laws.