BUSINESS

FanDuel CEO dodges questions re payment processor demands to exit New York

TAGs: AG Maura Healey, daily fantasy sports, dailymvp, DraftKings, Eric Schneiderman, fanduel, Massachusetts, Mondogoal, New York

fanduel-daily-fantasy-sports-payment-processing-new-yorkAt least one major online payment processing firm has decided it will no longer handle transactions for daily fantasy sports firms operating in New York.

As first reported by Chris Grove (@OPReport), online payment services firm Vantiv has sent an email to DFS operators requiring them to “immediately stop accepting players from New York.” Other processors are reportedly considering similar options.

Vantiv’s missive followed Tuesday’s announcement by New York Attorney General Eric Schneiderman that DFS was an illegal gambling activity in the state. Schneiderman has issued cease & desist orders to DFS operators DraftKings and FanDuel, giving them five days to cut ties with the estimated 1.1m customers the two sites deal with in New York.

FanDuel CEO Nigel Eccles (pictured) held a press call on Wednesday during which he was asked about communications from payment processors. Eccles dodged the question, saying his company was “comfortable with our relationships” with its processors and was “exploring every option that we can to continue offering” real-money play to its New York players.

Pressed to specifically confirm or deny whether processors had asked FanDuel to sever ties with New York players, Eccles said he “can’t really discuss commercial discussions.” Asked whether it might have been better for FanDuel to clarify its legal status first rather than seek forgiveness after the fact, Eccles said the company had ”always operated within the law and we don’t see how we would have operated differently.”

LEGAL FIGHT LOOMS
Both DraftKings and FanDuel have vowed to continue serving New York players while mounting a legal challenge of Schneiderman’s decision. Asked whether FanDuel’s team would be coordinating its legal pushback with DraftKings, Eccles said FanDuel would be “making its own legal decisions about how to proceed.”

FanDuel bases its operations out of New York and Eccles was keen to stress that Schneiderman’s order referred only to DFS activity with New York residents, not to the company’s general ability to operate from a New York address.

THE DOUBLE-EDGED SKILL GAME ARGUMENT
Some observers have noted an apparent contradiction in Schneiderman’s letter to the DFS operators, in which he simultaneously declared that DFS contests violated state law because they were dependent on luck while also arguing that the companies were misrepresenting the average player’s chances of winning against the DFS elite.

Eccles said FanDuel would bolster its ‘game of skill’ argument by compiling data that details the ability of a proven successful DFS player to outmatch a less skilled player. This is a dangerous strategy for DFS companies, which have marketed their wares to the average sports fan as a means of earning big bucks. Operators stand to lose a lot of business by revealing that average players are essentially chum for DFS sharks.

Asked on the call to comment on the widely publicized statistic showing 1.3% of DFS players earning 91% of player profits during the first half of this year’s Major League Baseball season, Eccles said “that data is not accurate” and promised to provide Schneiderman with a more accurate depiction of win-loss ratios.

MONDOGOAL, DAILYMVP EXIT NEW YORK
UK-based DFS operator Mondogoal doesn’t share the other operators’ opinion regarding DFS’ legality in New York. On Tuesday, Mondogoal CEO Shergul Arshad used his personal Twitter account to declare that his company “respects the New York Attorney General’s decision” and was therefore “eliminating cash fantasy sports play” in the state.

TopLine Games Labs’ DFS site DailyMVP also announced it would cease accepting wagers from New York residents. TopLine CEO David Geller told Bloomberg Business that while his company hadn’t been named in Schneiderman’s letter, he nonetheless viewed it as a shot across the bow that all DFS operators needed to respect, at least “until there is more clarity and/or a reversal of the AG’s position.”

PLAYERS SAFE, OPERATORS AND INVESTORS… NOT SO MUCH
Speaking with public radio’s The Capitol Pressroom on Wednesday, Schneiderman said his office wasn’t planning any legal assault against DFS end users. Schneiderman went on to tell CBS This Morning that protecting players was his main priority, as it was his opinion that DFS “really does lure in people who are the most prone to gambling addiction problems.”

Attorney Daniel Wallach (@WALLACHLEGAL) believes Schneiderman’s letter – which marks the first time DFS operators have been explicitly accused of criminal activity – will boost the chances of the US Attorney for the Southern District of New York bringing federal charges against DFS operators.

Wallach went on to tell Sportsnet 590 The Fan that DFS investors – including some of the major pro sports leagues and NFL team owners – could also be subject to charges for investing in illegal gambling businesses.

Wallach cautioned that the idea of Preet Bharara or the US Attorney in Tampa bringing charges against Dallas Cowboys owner Jerry Jones or New England Patriots owner Robert Kraft was unlikely, as “the targets are the operators.” Which could present a sticky wicket for Amaya Gaming, the only real-money online gambling operator that chose to enter the US DFS market.

Amaya withdrew its StarsDraft product from all but four US states – New Jersey, Massachusetts, Kansas and Maryland – last month based on its claim that these were the only US states that had “favorable existing daily fantasy sports guidance.” That said, Amaya showed no qualms about operating in the 46 legally unfavorable states until US media, regulators and law enforcement collectively shone their spotlight on the DFS sector.

Amaya’s belated decision to reduce its DFS profile may help insulate it from getting lumped in with any indictment of the DFS big boys, but the fact that it previously engaged in what is now viewed as criminal activity in New York could give Amaya’s opponents in states contemplating online gambling legislation added license to tag Amaya with the ‘bad actor’ label and thus reducing Amaya’s chances of securing new markets for its flagship PokerStars brand.

MASSACHUSETTS AG PROMISES DFS REGULATIONS BY END OF YEAR
On Wednesday, Massachusetts Attorney General Maura Healey told reporters that while it was her opinion that DFS is gambling, “just because it’s gambling doesn’t make it illegal.” Healey said she wasn’t ruling out following Schneiderman’s lead but claimed there was currently no state or federal law prohibiting DFS activity in Massachusetts.

Healey announced in September that her office was reviewing the legality of the Boston-based DraftKings, although she subsequently declared that she wasn’t pursuing a criminal case against the company. On Wednesday, Healey vowed to release recommendations by the end of the year to make sure DFS operators “play by the set of rules that we want to have them play by here so that consumers are protected and the public is protected.”

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