New York State attorney general Eric T. Schneiderman dealt a crushing blow to daily fantasy sports companies DraftKings and FanDuel on Tuesday, ordering that they stop accepting bets from New York residents because the nature of each site, according to Schneiderman, constitutes illegal gambling under state law.
This cease-and-desist order could bring the daily fantasy sports industry to its knees.
“Well, the problem now for the daily sports folks is that even though they think they might win down the line if this thing has to go to court, (it’s a big hit to their business now),” 60 Minutes Sports and CBS news correspondent Jack Ford said on CBS Sports Radio’s Gio and Jones. “And the language that the New York statute entails is a little bit hazy, so they might look at it and say, ‘We’re real confident about this,’ and the lawyers might say, ‘If we have to go to court to fight this, we think we’ll do well.’ The problem is, as you guys know, that doesn’t happen quickly. It takes a long time for a case to wind its way through the court system, and the real difficulty they have right now is that the people that they work with – their transaction providers is oftentimes the terms that’s used – (can’t work with them).
“FanDuel, DraftKings, they basically bring in somebody to handle all their transactions, and these people are probably going to say, ‘Hey, you know what guys? We can’t work with you right now until you figure this out because we can’t run the risk of getting smacked by New York State here and having to pay fines or maybe have our licenses suspended.’ According to the letter from the attorney general, (the daily fantasy sports companies) have five days to respond. So I think what you’re seeing now is these transactor providers are saying, ‘You all are going to have to figure this out, but until you do, we can’t be playing here. So let us know when you’re back in business and we’ll come.’ So for the short-term, it sounds like it’s going to hurt them badly. Remember, New York is apparently something like 12 percent of their total market. It’s an enormous hit for them.”
A similar situation unfolded last month in Nevada.
“Nevada regulators said to fantasy players, ‘Hey, you guys are gambling, so you’re going to have to get licenses to do business here,’” Ford said. “And basically (the daily fantasy sports companies) said, ‘That’s fine, we’re leaving. It’s not important to us to be in Nevada.’ It’s enormously important for them to be in New York, so it’s a big fight that they’re looking at now.”
The definition of gambling, under New York state law, is wagering on “any contest, game, gaming scheme or gaming device in which the outcome depends in a material degree upon an element of chance, notwithstanding that skill of the contestants may also be a factor.”
“In some states, (the definition is) very precise, the definition is easy,” Ford said. “New York, the language is a little hazy. It’s not very precise. . . . The state says . . . that skill is a factor here. It combines with elements of chance and contingent events. . . . So really, if you look at the language, it’s not terribly precise, which I think has given rise to this whole problem.”