By Paul Nicholson
January 12 – The daily fantasy sports (DFS) operators have been given permission to continue operations following a decision by a panel of four judges from the Appellate Division of the New York State Supreme Court to grant a further stay while a case against DraftKings and FanDuel is being reviewed.
The dispute is over whether DFS games are gambling – and as such illegal until regulated – or whether they are a game of skill relying on the gamers’ knowledge to pick winning teams.
Daily fantasy sports involves gamers receiving points based on how real-life players perform on a particular day. Gamers pick their teams by “buying” the athletes they want and staying within a maximum budget. Gamers can enter one-on-one matches for $1 or games with thousands of participants competing for seven-figure prizes.
The business has seen the rapid growth of two competing platforms in the US, FanDuel and DraftKings, and there are various plans to expand the business into Europe with football based games. The US rulings will likely influence how European regulators approach what has rapidly emerged as a significant business opportunity for leagues and clubs.
New York attorney general Eric Schneiderman argues that the games are gambling and are subject to manipulation by the operators. Schneiderman has already filed one lawsuit that saw the games suspended before a stay was granted by a New York judge to allow them to continue operating while they appealed against the decision.
Schneiderman came back again on New Year’s Eve adjusting his suit and asking for FanDuel and DraftKings to return all profits made in New York, repay customers who lost money and pay up to $5,000 in fines to every customer. It is estimated the two companies have earned more than $200 million in entry fees last year from around 600,000 customers.
The granting of the new stay means Schneiderman has failed to get the games suspended.
The stay appears to be based on possible irreparable harm to DraftKings and FanDuel that an injunction would create, if they had to stop serving the New York market.
This means the operators can still sign-up and take money from players while the original case is still being deliberated. So far there is no indication from the courts as to their current thinking on what has become a high stakes game.
DraftKings issued statement following the news of the stay from counsel David Boies saying:”We are pleased with the Court’s ruling today. Daily Fantasy Sports contests are as legal now as they have been for the past seven years that New Yorkers have been playing them. As our litigation continues, we expect an appellate court to see what we have known since the outset: DFS is a game of knowledge and skill, one that builds community and whose competitive spirit has become important to the lives of millions of people. Our ongoing appeal will make clear that daily fantasy contests require just as much skill as season-long contests, which the Attorney General recognizes as perfectly legal under state law.
“We are engaged with legislatures and Attorneys General across the country, including in New York, to ensure that our fans are able to experience our contests in a fun and fair way with appropriate and thoughtful consumer protections in place. This includes active collaboration with the Attorney General in Massachusetts, where we are working to become the industry leader in transparency and consumer protection. We will continue in these efforts so that fans can keep enjoying Daily Fantasy Sports for years to come.”
Damien LaVera, Attorney General Eric Schneiderman’s communications director, countered saying:”Having already obtained a preliminary injunction against these companies, we look forward to demonstrating to the appellate division that the trial judge was correct. DraftKings and FanDuel are indeed operating illegal gambling operations in New York and should be permanently barred from doing business in New York.”
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