Two days before Christmas, Madigan released her opinion that DFS was illegal gambling under state law and sent notices to both DFS operators saying she expected them to add Illinois to the list of states from which they didn’t accept action.
The sites promptly filed complaints seeking damages for Madigan allegedly harming their reputation and impeding their ability to conduct business, while seeking a ruling that their operations aren’t violating Illinois’ Criminal Code.
Within days, the parties reached a deal “not to pursue any other action” against each other until the matter was resolved. The sites were widely considered to be playing for time while state legislators attempted to pass DFS-friendly consumer protection bills that would exempt DFS from state gambling laws.
In a pair of filings issued on Friday, Madigan argues that the DFS operators’ complaints are “barred by sovereign immunity” because issuing legal opinions is well within her constitutional and statutory powers and, more importantly, issuing her opinion “did not violate any law.”
Madigan points out that she didn’t order the companies to cease operations, nor did she threaten them with civil or criminal litigation, mainly because Illinois law doesn’t give her primary enforcement powers in such matters.
Madigan says the operators failed to provide any facts demonstrating that they’ve experienced the “concrete hardship necessary to convert their disagreement with the Opinion into a ripe justiciable controversy.”
Madigan also questioned why FanDuel’s complaint was “oddly” joined by season-long fantasy sports operator Head2Head Sports. Madigan notes that her opinion wasn’t directed at nor even mentioned Head2Head, as the opinion was solely concerned with DFS, which Head2Head doesn’t offer.
FanDuel’s inclusion of Head2Head was widely viewed as an attempt to lump in season-long fantasy sports with DFS, thereby broadening the presumed base of outraged fantasy players and perhaps enlisting more support from state politicians to pass the pro-fantasy legislation.
As of this week, five state AGs – New York, Nevada, Vermont, Texas and Illinois – have publicly declared DFS to be illegal gambling since the ‘data leak’ controversy broke last October. Of these, only New York’s Eric Schneiderman has filed criminal complaints against DFS operators but many other states are believed to be weighing their options.
DFS TV AD BUYS EVAPORATE
The legal costs of dealing with these AG opinions – and furious lobbying at both the state and federal level in the hopes of warding off additional negative rulings – have begun to take their toll. This week brought reports that FanDuel had begun cutting staff at its New York HQ, while DraftKings is reportedly looking to sub-lease the New York office space it leased just last summer.
This week also brought reports of how little cash the two DFS operators are currently dedicating to promoting their products on television. iSpotTV figures reveal that in the 30-day period ending Jan. 21, DraftKings spent $1.6m on TV ads while FanDuel spent just under $1m.
The figures represent a tiny sliver of the money the two operators spent during their pre-controversy ad binge. From the start of September 2015 through Jan. 21, 2016, FanDuel spent $132m on TV ads while DraftKings spent $95.3m.
Both operators have claimed that it was always their intention to spend big at the start of the NFL season and taper off as the season progressed. That may be true, but the cuts also reflect the companies’ desire to lower their public profile and to reduce costs after the negative publicity surrounding the average player’s ability to win a DFS prize took a toll on entry fees.