A New York State judge issued an order blocking mammoth daily fantasy sports sites DraftKings and FanDuel from operating in the state Friday. Supreme Court Justice Manuel Mendez issued a preliminary injunction, upholding New York State Attorney General Eric Schneiderman's cease-and-desist order against allowing either site to accept entry fees from users.
Schneiderman has challenged assertions by FanDuel and DraftKings that they offer games of skill and not simply chance, with the latter typically reserved for legal forms of gambling.
"We are pleased with the decision, consistent with our view that DraftKings and FanDuel are operating illegal gambling operations in clear violation of New York law," Schneiderman said in a statement. "I have said from the beginning that my job is to enforce the law, and that is what happened today."
However, lawyers for DraftKings have already stated they will file an emergency appeal.
"We are disappointed with the court's decision, and will immediately file an emergency notice of appeal in order to preserve the status quo," DraftKings attorney David Boies said in a statement. "Daily Fantasy Sports contests have been played legally by New Yorkers for the past seven years and we believe this status quo should be maintained while the litigation plays out."
Forbes reported Mendez’s ruling specifically cited New York Penal law section 225.00, a rule that irons out the definition of “Contest of Chance” as “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 therein.”
The ruling doesn’t hinder either site from operating in most any other state in the country, and some New York lawmakers currently are trying to work out legislation to allow daily fantasy sports in some fashion as long as regulations are in place.
Marc Edelman, an associate law professor at the Zicklin School of Business at Baruch College and a specialist in gaming law, said among the two companies, FanDuel has taken a tactically more risk-averse approach.
"FanDuel voluntarily left New York upon the attorney general’s cease-and-desist letter, and has refrained from offering contests such as one tournament in fantasy golf, and one race-fantasy NASCAR," Edelman said. "By contrast, personnel at DraftKings such as CEO Jason Robins, as well as partners such as Major League Baseball commissioner Rob Manfred have drawn a line in the sand, maintaining all daily fantasy sports, outside of six states of every variety they offer, is legal. Because they have drawn this line in the sand, they have not refrained from more risky behavior and not from what is susceptible to legal challenges in various states as well as under federal law."
"To the extent that I have consulted to the businesses of the daily fantasy sports marketplace I had recommended that they exit the New York market long ago, beginning immediately upon the New York attorney general filing cease-and-desist letter against FanDuel and Draft Kings.
"While this current case only targets FanDuel and DraftKings, it would be utterly foolish for any smaller sites to continue to do business in New York in the interim. Companies that choose to continue operating daily fantasy sports contests in New York while the preliminary injunction is issued against FanDuel and DraftKings, put themselves at risk, not only of a similar cease and desist order but also criminal charges in states."