Attorney General Tells DraftKings and FanDuel to Stop Taking Entries in New York

Photo The New York attorney general began an inquiry last month, asking two leading companies, DraftKings and FanDuel, for a range of internal data and details on how they prevent fraud. Credit Michael Nagle for The New York Times The New York State attorney general on Tuesday ordered the two biggest daily fantasy sports companies, DraftKings and FanDuel, to stop accepting bets from New York residents, saying their games constituted illegal gambling under state law.

The cease-and-desist order by the attorney general, Eric T. Schneiderman, is a major blow to a multibillion-dollar industry that introduced sports betting to legions of young sports fans and has formed partnerships with many of the nations professional sports teams.

Given the New York attorney generals historic role as a consumer-protection advocate, legal experts said the action was 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.

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, Mr. Schneiderman said, adding, Today we have sent a clear message: not in New York, and not on my watch.

Continue reading the main story Wired for Profit In 2006, Congress tried to crack down on illegal online sports betting. Today, Internet wagering is thriving, and a new business that resembles gambling, fantasy sports, is winning millions of players and stoking controversy. The Times, with the PBS series Frontline, investigated illegal gambling in the Internet age.

Sign up to receive an email when we publish the next stories in this series.

Fantasy sports companies contend that their games are not gambling because they involve more skill than luck and were legally sanctioned by a 2006 federal law that exempted fantasy sports from a prohibition against processing online financial wagering. That view is being challenged as fantasy sites have begun offering million-dollar prizes and bets on individual sports, such as golf, mixed martial arts and Nascar races, magnifying the element of chance and making the exemption more difficult to defend.

On Tuesday afternoon, as news of the attorney generals order began to trickle out, DraftKings sent an email to its players, saying, Attorney General Eric Schneiderman is considering preventing New Yorkers from playing daily fantasy sports, and added: Hey, New York, protect your right to keep playing daily fantasy sports. Contact the attorney general today!

Sabrina Macias, a spokeswoman for DraftKings, said, Were disappointed he hasnt taken the time to meet with us or ask any questions about our business model before his opinion. She said there were more than 500,000 daily fantasy sports users in New York State.

Photo For much of the N.F.L. season, DraftKings and FanDuel have blanketed the airwaves with television advertising, spending more than $100 million each. Credit Justin Lane/European Pressphoto Agency Eric Soufer, a spokesman for the attorney general, disputed Ms. Maciass account, and said the attorney generals office had multiple meetings with representatives from DraftKings before issuing the order.

In response to the letter it received from the attorney general, DraftKings said, We strongly disagree with the reasoning in his opinion and will examine and vigorously pursue all legal options available.

In a statement, FanDuel said: Fantasy sports is a game of skill and legal under New York state law. This is a politician telling hundreds of thousands of New Yorkers they are not allowed to taruhan bola play a game they love and share with friends, family, co-workers and players across taruhan bola the country.

Continue reading the main story The two companies can challenge the attorney generals order in court. According to Joseph M. Kelly, a professor of business law at the State University College at Buffalo, the state would have to prove that chance is a material factor in fantasy sports, which would make it gambling.

Players who bet on fantasy sports assemble their own teams of professional athletes who compete based on their statistical performances in games. Mr. Schneidermans order does not apply to seasonal competitions or to other companies that offer fantasy games.

By concluding that daily fantasy games constitute gambling, Mr. Schneiderman has also directed an uncomfortable spotlight on some professional sports leagues that oppose gambling while maintaining financial partnerships with daily fantasy sports sites.

Continue reading the main story Document: FanDuel Letter A recent New York Times investigation reported that operators of online gambling sites had begun investing in fantasy companies and that some of DraftKings senior managers came from online gambling companies or were professional poker players.

Mr. Schneiderman began investigating the fantasy sites after a DraftKings employee inadvertently released internal betting data and that same week won $350,000 on FanDuel, which is based in New York. DraftKings hired an outside law firm to investigate the matter, and found that the employee did nothing wrong. Both fantasy companies had allowed employees to bet on rival sites, but no longer do. Mr. Schneiderman asked the two companies for internal data and details on how they prevent fraud.

Nevada regulators ruled last month that daily fantasy sports should be considered gambling, and ordered fantasy companies to suspend operations until they secured gaming licenses. A Florida grand jury has subpoenaed records of the fantasy sports trade group, the United States attorney in Manhattan has begun an investigation, and the F.B.I. office in Boston, where DraftKings headquarters are, has begun interviewing fantasy players.

Continue reading the main story Document: Letter to DraftKings In addition, nearly a dozen states are considering some form of fantasy sports legislation, according to GamblingCompliance, an independent service that monitors gambling legislation.

The attorney generals office also said that ads on the two sites seriously mislead New York citizens about their prospects of winning. State investigators found that to date, the top 1 percent of DraftKings winners receive the vast majority of the winnings.

For much of the N.F.L. season, DraftKings and FanDuel have blanketed television with advertising, spending more than $100 million each, and consistently ranking among the top companies each week in buying airtime.

Last September, FanDuel said it was signing 20,000 to 30,000 players every day. Major League Baseball, the N.B.A. and companies like Comcast, NBC and Google are among its investors. Nearly every N.F.L. team has a sponsorship deal with DraftKings or FanDuel, and two powerful N.F.L. owners Jerry Jones of the Dallas Cowboys and Robert K. Kraft of the New England Patriots have equity stakes in the companies.

The attorney generals office said daily fantasy sports appears to be creating the same public health and economic problems associated with gambling. The National Council on Problem Gambling says it has received reports of severe gambling problems in some people who play daily fantasy sports, while noting that seasonal competitions with minimal prizes offer little risk.