The Slatest

New York Attorney General Orders DraftKings and FanDuel to Stop Cash Prize Contests in State

The fantasy sports website DraftKings is shown on October 16, 2015 in Chicago, Illinois.

Photo illustration by Scott Olson/Getty Images

New York’s attorney general on Tuesday delivered the latest blow to daily fantasy sports sites FanDuel and DraftKings, declaring them illegal gambling under state law and ordering them to bar New York residents from enrolling in cash prize contests on the sites. Attorney general Eric Schneiderman gave the companies five days to reply to the cease-and-desist order, although the sites can—and surely will—contest the decision in court. The order does not go so far as to require the companies in the exploding multi-billion dollar industry shut down operations in the state. FanDuel is headquartered in a 40,000 square foot office in New York City; DraftKings, which is based in Boston, recently opened a 21,000-square foot satellite office in Manhattan.

“Our investigation has found that, unlike traditional fantasy sports, daily fantasy sports companies are engaged in illegal gambling under New York law, causing the same kinds of social and economic harms as other forms of illegal gambling and misleading New York consumers,” Schneiderman said in a statement. “Daily fantasy sports is neither victimless nor harmless, and it is clear that DraftKings and FanDuel are the leaders of a massive, multi-billion-dollar scheme intended to evade the law and fleece sports fans across the country. Today we have sent a clear message: not in New York and not on my watch.”

“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 nation’s professional sports teams,” the New York Times reports. “Given the New York attorney general’s historic role as a consumer-protection advocate, legal experts said the action will most likely reverberate in other states where legislators and investigators are increasingly questioning whether the industry should operate unfettered by regulations that govern legalized gambling.”

Last month, Nevada similarly clamped down on the fantasy gaming sites ordering them to obtain a gaming license to continue operation in the state. The states’ prohibition on the sites is part of a growing wave of concern over lax regulation of the industry that has poured millions of dollars into just about every professional sports league and team in the U.S. The crosspollination between pro sports and the fantasy sites puts the leagues in an awkward position following years of trying to keep gambling out of American sports. Lawmakers have also said they intend to review the fantasy sports industry’s designation as games of skill, not chance, which has effectively exempted them from the 2006 Unlawful Internet Gambling Enforcement Act, prohibiting online gambling.

Both companies maintained their contests with cash prizes that stretch into the millions of dollars are games of skill. According to the Times, “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!’”