For years, daily fantasy sports were just chugging along, carving their own niche between full-season fantasy sports and simply betting on games. Then they started dumping unholy amounts of money into advertising, to the point where the names FanDuel and DraftKings became ubiquitous (and despised among TV viewers). Well, since they decided to become household names, the two daily fantasy titans have come under increased scrutiny because of their resemblance to straight-up gambling.
Daily fantasy sites have already been banned in six states, including Nevada, and now New York’s Attorney General, Eric Schneiderman, has issued cease-and-desist letters to FanDuel and DraftKings, demanding they stop accepting “wagers” from New York residents. Here’s his statement explaining his reasoning:
“Our investigation has found that, unlike traditional fantasy sports, daily fantasy sports companies are engaged in illegal gambling under New York law, causing the same kinds of social and economic harms as other forms of illegal gambling, and misleading New York consumers. 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. Today we have sent a clear message: not in New York, and not on my watch.”
There couldn’t be a more significant state to make a decision like this. New York contains the most participants in daily fantasy of any state, according to the ESPN article linked above. What’s more, FanDuel is based in New York, and DraftKings has an office there as well. ESPN also details the myriad sponsorships the companies have all over New York City — the Giants, Jets, Yankees, Knicks, Rangers and Nets all have major sponsorship deals, and DraftKings’ name is on the jerseys of the New York Liberty.
That’s significant because even in Nevada, DraftKings and FanDuel ceased operations when told. But if they lose New York, they would suffer a possibly fatal wound, so they’re fighting it. Here’s part of FanDuel’s statement released in response to the cease-and-desist:
“Fantasy sports is a game of skill and legal under New York State law… The game has been played — legally — in New York for years and years, but after the attorney general realized he could now get himself some press coverage, he decided a game that has been around for a long, long time is suddenly now not legal. We have operated openly and lawfully in New York for several years. The only thing that changed today is the attorney general’s mind.”
The company’s right about one thing — no law on the books was changed to facilitate Schneiderman’s decision. He claims it came about only after an investigation revealed the site’s true nature, but that doesn’t quite hold water. He could have simply played it for a week and found out what he needed to know about the structures of payment and the casino-like encouragement to keep playing. The only thing that’s changed about daily fantasy has been its level of exposure.
But then again, the increased scrutiny they’ve earned has meant that “game of skill” defense has been tested, as well. Nevada’s investigation that led to the banning of daily fantasy exposed communication from executives of the sites who directly compare their businesses to casinos and poker.
It’s a complicated issue, but the main takeaway is this: The New York AG has finally compelled daily fantasy sites to defend their business and distinguish it from gambling in a court of law to survive. After years spent in the legal shadows, largely unregulated because so few cared, daily fantasy will finally have to come under the bright lights. It’s too early to say if they will win their fight, pivot to call themselves gambling, or facilitate a needed rethinking of the legality of sports gambling, but something will happen. And that in itself is progress.