New York Attorney General Eric Schneiderman yesterday ordered DraftKings and FanDuel to "stop accepting bets from New York residents, saying their games constituted illegal gambling under state law," according to a front-page piece by Bogdanich, Drape & Williams of the N.Y. TIMES. The cease-and-desist order is a "major blow to a multibillion-dollar industry." Legal experts said that the action is "likely to reverberate in other states where legislators and investigators are increasingly questioning whether the industry should operate unfettered by regulations that govern legalized gambling." Schneiderman said, "It is clear that DraftKings and FanDuel are the leaders of a massive, multibillion-dollar scheme intended to evade the law and fleece sports fans across the country." Schneiderman's office said DFS “appears to be creating the same public health and economic problems associated with gambling.” DraftKings Head of Communications Sabrina Macias said of Schneiderman, "We’re disappointed he hasn’t taken the time to meet with us or ask any questions about our business model before his opinion.” Schneiderman spokesperson Eric Soufer disputed Macias’ account, saying that the AG's office "had multiple meetings with representatives from DraftKings before issuing the order." DraftKings and FanDuel "can challenge" the order in court (N.Y. TIMES, 11/11). Schneiderman said that the games "are subject to criminal penalties" and gave the companies "five days to respond." The order "won’t prohibit" FanDuel from operating in New York, "only from accepting money from state residents." The notice said that the companies, "much like a lottery, mislead
consumers into believing they have a shot at winning big, when in
reality the odds are vastly stacked against them." In a front-page piece, the WALL STREET JOURNAL's Sharon Terlep notes this is the "first time fantasy-sports operators have been formally accused of criminal activity" (WALL STREET JOURNAL, 11/11).
A STUNNING BLOW: In Boston, Adams & Woodward in a front-page piece write locally based DraftKings was "dealt a stunning blow" with Schneiderman's order. New York is the "highest-profile and most populous state to forbid the contests." Schneiderman's ruling "stokes worries that the entire daily fantasy industry is on increasingly shaky legal ground" in the U.S. It "could also jeopardize" the nearly $1B investors have "pumped into the two companies." Eilers Research Managing Dir Adam Krejcik: "It's disastrous. There's no other way to put it." Former Massachusetts Attorney General Martha Coakley, an adviser for DraftKings, said that Schneiderman’s decision "caught the company by surprise." Coakley said the ruling is "not evidence-based and was made in too hasty a manner." She added, "It’s not a fair decision" (BOSTON GLOBE, 11/11). Also in Boston, Bob McGovern notes DraftKings "vowed to fight the ruling and said it will continue to operate in the state." DraftKings spokesperson Benjamin Spicehandler said, "We are not pulling out of New York. We are fighting this" (BOSTON HERALD, 11/11).
NOW THIS IS AWKWARD: ESPN.com's Purdum & Rovell note N.Y.-based FanDuel "just opened a 40,000-square foot office," while Boston-based DraftKings also "has a new, 21,000-square foot satellite office in Manhattan." Both companies "want to protect their New York customer base." According to gaming firm Eilers Research, New York "has the most daily fantasy participants of any state." Ads for DraftKings and FanDuel "can be prominently seen throughout New York City, including in subway stations and on street vendors." DraftKings "has a sizable deal" with MSG that "includes on-court signage at Knicks and Rangers games and a fantasy lounge." The deal also gives DraftKings the "main sponsorship" on the WNBA Liberty jerseys (ESPN.com, 11/10). USA TODAY's Brent Schrotenboer writes this is a "crushing blow" to both companies. It also "makes things increasingly awkward for the sports leagues that have stakes in these companies as equity investors" (USA TODAY, 11/11).
