BREAKING NEWS!!! A New York state judge on Friday granted a request from the New York attorney general to temporarily shutter DraftKings and FanDuel in the state, handing a devastating blow to the fast-growing but controversial daily fantasy sports industry.
New York Judge Manuel J. Mendez granted preliminary injunctions sought by state Attorney General Eric Schneiderman, ruling that daily fantasy sports, or DFS, contests offered by DraftKings Inc. and FanDuel Inc. are likely illegal forms of gambling under New York law. The decision comes just weeks after a hearing on dueling motions for preliminary injunctions by the attorney general and the companies and means the popular DFS companies must stop allowing users from New York.
DraftKings and FanDuel, which offer online contests where participants select imaginary rosters of players from the NFL and other sports leagues, had argued that their contests are legal in New York as games of skill, with participants able to control or influence the outcome of contests through selecting the lineups.
They had further contended that they have operated in the state for years without issue and sought their own preliminary injunctions to block Schneiderman’s adverse actions.
Schneiderman set off the dispute last month when he hit DraftKings and FanDuel with cease-and-desist letters deeming their contests to be illegal gambling in the state akin to sports betting.
He argued that the contests violate Section 225 of the New York Penal Code since the outcome of the contests are based on the underlying real-world sports games that are outside the control or influence of the daily fantasy sports participants. He further argued the sites deceptively promote their games to consumers, given that only a small percentage of users win a majority of the prize money.
Schneiderman had launched an investigation into DraftKings and FanDuel in October after an “insider” scandal raised questions about the companies’ consumer protection policies and safeguards.
But DraftKings and FanDuel said they were blindsided by the cease-and-desist letters last month, contending Schneiderman’s office never indicated that it was looking into the legality of their contests. They had sought immediate temporary restraining orders, but Judge Mendez denied their bids, shifting the issue to last month’s preliminary injunction hearing.