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New York Attorney General goes after FanDuel, DraftKings -- again

4 Jan 2016

By Gary Trask
A turbulent year for the daily fantasy sports industry ended with another unexpected development last week when New York Attorney General Eric Schneiderman filed an amended lawsuit on New Year's Eve, asking FanDuel and DraftKings to repay all of the money it has generated from the state – an estimated $200 million – and pay a fine of up to $5,000 per case.

The news hit three weeks after a New York Supreme Court judge granted Schneiderman's preliminary injunction against DFS operators, saying they are "illegal gambling operations" that "subject the public to fraudulent perceptions." Subsequently, FanDuel and DraftKings won a temporary reprieve from the order to stop doing business in the state and have remained operational.

"It's definitely surprising," said Jeff Ifrah, who specializes in iGaming law and is a founding partner of Ifrah Law in Washington, D.C. "It certainly feels like [Schneiderman] has now upped the ante in terms of litigation."

As for the timing of the new request, Ifrah said it may be because Schneiderman is worried about a new law being passed that would "essentially end his litigation."

"If they legalized daily fantasy sports in the state when the legislature returns and they start working on a budget, his lawsuit would be terminated without any real success having been achieved. One way to achieve success would be to seek damages for prior acts and prior revenue that was generated by these companies before any such legislation passes."

Ifrah added that it's difficult to predict if DFS will ultimately make it into the state's budget discussion.

"There are sponsors out there that have been identified, so it most likely will be introduced," he said. "But it's unclear how much momentum and support it will receive when the time comes."

In a statement, DraftKings attorney David Boise said Schneiderman's revised complaint "reveals" the attorney general "still does not understand fantasy sports" and "it is based on the fundamental misunderstanding of fantasy sports competitions."

"Originally, the NYAG claimed that daily fantasy sports were illegal gambling because they were games of chance. That was disproven. Now, the NYAG complains that DFS contests are so much contests of skill that some advertising is misleading because, the NYAG says, certain ads imply that DFS contests are games of chance. This claim, too, is baseless.

On Monday, two Indiana lawmakers stepped into the fray – but unlike New York, Illinois and Nevada, they proclaimed support for the industry, saying, "We believe that sports drafting is a game of skill and not of chance."

"With the backlash they have received in their home state, we propose FanDuel move their headquarters to Indiana," said Rep. Alan Morrison, R-Terre Haute, and Sen. Jon Ford, R-Terre Haute, in an article posted on the Indiana House of Representatives Republican Caucus titled, "Hey FanDuel, make Indiana your home." "Over the last decade, Indiana has shown time and time again that we are a business-friendly state with a strong workforce. Our unemployment rate is at the lowest it has been for the last 14 years. In fact, Indiana is a top-10 state in the nation for business, according to Forbes.

"In order to be prepared for daily fantasy sports sites in our state, we will each be introducing legislation calling for basic consumer protections and transparency, so consumers who use fantasy sports sites in Indiana are protected. By adding some industry-accepted consumer protections, we hope to give all participants the assurance of a fair game while participating in these sites."
 
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