DraftKings and FanDuel have suffered a huge blow in their legal battle to continue to operate in the state of New York.
A judge today granted the injunction sought by the New York Attorney General’s Office that prevents the operators from taking bets from New Yorkers for the duration of the case.
FanDuel agreed to suspend its operations in the state until the outcome of today’s hearing, while DraftKings had defiantly continued to take bets, but must now cease to do so.
While this is not the end of the lawsuit between the daily fantasy sports operators and New York, the signs are ominous for the sites; the court would be unlikely to grant the injunction without strongly favoring the position of the attorney general.
The litigation escalated in mid-November when AG Eric Schneiderman wrote cease and desist letters to the two sites informing them that their operations constituted “illegal gambling” under New York law.
While New York’s DFS fans protested on the streets, both sites launched legal action against the AG’s office in order to challenge the opinion and protect their business in the state.
They also launched an unsuccessful request for a temporary restraining order to prevent Schneiderman from issuing the injunction that was granted today.
Lawyers for the sites spent several hours at a New York Assembly hearing on DFS on Tuesday arguing that the practice was a game of skill and that transparency and player protection were paramount to the industry.
“We want to work with you to ensure that fantasy contests are legal, safe for consumers, and continue to provide the great entertainment value that has driven our growth over the past few years,” FanDuel’s counsel for policy and government affairs Cory Fox told assembled lawmakers in Albany.
“We believe that the best path forward for the fantasy sports industry is to craft regulatory solutions that will allow the millions of users who love fantasy sports to continue to play.”
But today in court the simple question that Justice Manuel Mendez was required to answer was whether setting a DFS line-up is a skill or a wager. It is, he answered, the latter.
The sites’ lawyers had argued that since they were not taking “wagers” but entry fees DFS could not be viewed as gambling under state law, an argument that Mendez dismissed.
“New York State penal law does not refer to ‘wagering’ or ‘betting,’ rather it states that a person, ‘risks something of value,'” he said. “The payment of an ‘entry fee’ as high as $10,600 on one or more contests daily could certainly be deemed risking ‘something of value.'”
Both operators are likely to file emergency appeals.