Friday morning the daily fantasy sports industry was knocked down in their bout against New York Attorney General Eric Schneiderman but by late afternoon an appellate court granted a stay allowing DraftKings and FanDuel to win the round.
New York Supreme Court Justice Manuel Mendez decided to grant Schneiderman’s request for an injunction against the leading DFS sites, forcing them to stop offering games to New York State residents.
In his ruling (Read it Here), Mendez states, “The balancing of the equities are in favor of the NYAG and the State of New York due to their interest in protecting the public, particularly those with gambling addictions. FanDuel, Inc. and DraftKings, Inc., are only enjoined and restrained in the State of New York, DFS is permitted in other states, and the protection of the general public outweighs any potential loss of business.”
DraftKings immediately filed for and received a stay order from an appellate court to remain operational in New York, which accounts for about 12% of their total players.
The stay will remain in effect at least for a few weeks. The NYAG office has until December 22 to file an opposition to the stay, which a spokesperson from their office said they would, and then FanDuel and DraftKings have until January 4 to reply to the AG’s opposition. Then a NY state appeals court consisting of a 5-judge panel will decide whether to continue the state or allow Mendez’s ruling to stand.
Legal expert Daniel Wallach tweeted some interesting information about the reversal rates from the appellate court and Judge Mendez which could be a positive sign for the DFS sites.
Since 2011, Justice Mendez (the #DFS judge) has had 74 of his orders appealed; he was reversed in 19 cases. Reversal rate = 25.67%
— Daniel Wallach (@WALLACHLEGAL) November 28, 2015
Rate of reversal at NY Appellate Div 1st Dept. is 15% (2011-2013). Judge Mendez reversal rate higher than average https://t.co/1qUMRNeCEb
— Daniel Wallach (@WALLACHLEGAL) December 12, 2015
With the appellate court decision, FanDuel, who had voluntarily left the state when Schneiderman first sent the cease and desist letters in November, announced they would resume accepting entries from New York State residents.
In a statement FanDuel said, “This is only the beginning of the legal process and, perhaps more importantly, the New York legislature is already moving forward on action to ensure our game remains legal and is regulated, which we strongly support. The court specifically noted that this was not a final determination of the issue and that discovery would be needed to fully resolve the legal question, which we think should be decided in our favor when all of the evidence is in.”
The Boston Globe reported that two of DraftKings processors, PayPal and Bank of America, stopped processing NY transactions for the company when Mendez’s ruling was first announced but PayPal has reversed their decision. There is no word on Bank of America doing the same but they may need to facilitate payments or risk a lawsuit from DraftKings.