FanDuel and DraftKings late yesterday each submitted opening briefs with the N.Y. Appellate Court, arguing that daily fantasy is a game of skill, and that lower courts erred in granting state Attorney General Eric Schneiderman a restraining order against the pair. That order has now been stayed pending an upcoming trial, and the new paperwork again makes the argument that DFS should be legal in part because its season-long counterpart remains so in N.Y. “Our contests are no less legal than season-long fantasy sports, which the attorney general has repeatedly conceded are legal,” DraftKings’ filing reads in part. DraftKings went on to say that Schneiderman's "repeated concessions that season-long fantasy sports are legal, while contending that DFS is not, have become increasingly tenuous and incoherent with each successive filing. The obvious truth is that there is no difference between the two under New York law. It is the same game, differentiated by the period of time over which each is played.” Schneiderman’s office in a statement said they remain resolute in seeking to have the pair stop doing business in N.Y. “We look forward to demonstrating to the Appellate Division, as we have to the trial court, that DraftKings and FanDuel should be prohibited from illegally taking bets in New York State,” Schneiderman’s office said. A response from the AG is due by March 23, and oral arguments could be scheduled for the spring (Eric Fisher, Staff Writer).
TEMPERED EXPECTATIONS: The ’16 outlook for the DFS industry has been significantly downgraded according to a new report from Eilers & Krejcik Gaming. In the report issued yesterday, the overall DFS market has been projected to reach at best $14B in annual entry fees by ’20, down sharply from a prior forecast of nearly $18B. Because of ongoing legislative scrutiny, the report issued three different DFS industry forecasts, each of which are worse than the firm’s prior projection. A worst-case scenario -- assuming DFS operators are forced to withdraw from or severely limit operations in multiple high-revenue states -- pegged entry fees at $4B per year by ’20. A more neutral forecast -- assuming a loss of at least one top-revenue state but positive legislation elsewhere -- estimates annual industry fees at $8B by ’20. The report estimated FanDuel net revenues for ’15 at $174M, up 203% from '14, and DraftKings net revenue for ’15 at $105M, up 250%. The report further estimated $1.77B in entry fees for FanDuel in ’15 (+185%) and $1.17B for DraftKings (+286%). Each was significantly in the red due to heavy advertising expenditures. Eilers & Krejcik also said that roughly 1% of DFS power users account for more than 60% of total industry revenues, and questioned whether that heavy concentration is sustainable given the current climate. “The trajectory for 2015 viewed from 2014 was clear -- growth ahead, with the only question being how much and how fast. But viewing the year ahead today, it is easy to imagine a number of wildly divergent trajectories for DFS based on political, legal, economic, business model, consumer and market pressures,” the report reads (Fisher).
SHARK ATTACK: In Sacramento, Bob Shallit reported local developer Jim Donovan "is placing a big bet" on DFS, as he and two partners have developed an online game -- GolfSharks -- that "allows fans to select teams of U.S. and European golf pros and make daily wagers on their performances." This is a "first for the multibillion-dollar business -- a fantasy game focused exclusively on golf instead of baseball, basketball and football." Donovan said, “I think this year we’ll get clarity on regulations for fantasy sports, and in the next two years they’ll legalize all sports betting." Shallit noted the idea for GolfSharks "sprang from friendly betting contests he ran for years with his golfing buddies." The three partners -- Donovan, Mat Eland and Jason Eland -- "contributed about $250,000 to develop a beta version of the game, in which players pick six golfers -- two from among the top five-ranked players in the world, two from those in the top 20 and two more from the rest of the field" (SACBEE.com, 2/19).
