BUSINESS

DraftKings, FanDuel ink deal with New York AG to halt real-money fantasy contests

TAGs: daily fantasy sports, DraftKings, Eric Schneiderman, fanduel, New York

new-york-daily-fantasy-sports-draftkings-fanduelDaily fantasy sports operators DraftKings and FanDuel have agreed to cease offering paid fantasy contests in New York state until their legal tiff with the state’s attorney general is resolved.

On Monday, New York AG Eric Schneiderman announced that both DFS operators had agreed to stop offering paid fantasy contests to New York residents until September, when the state appeals court handling the sites’ appeals of Schneiderman’s cease and desist order holds a hearing. (Copies of the individual agreements can be viewed here and here.)

In exchange, Schneiderman has agreed not to pursue litigation aimed at forcing the sites to repay all moneys collected from New York DFS players. However, Schneiderman said Monday’s agreement didn’t prevent him from pursuing previously filed claims of false advertising and consumer fraud.

If you’re just joining us, Schneiderman filed a legal complaint against both operators last November, based on his opinion that the sites were illegal gambling operators as defined by state law. Schneiderman followed that up with his C&D order but the operators convinced a state court to stay that ruling while their appeals are heard.

Monday’s agreements note that New York legislators are making efforts to amend state gambling laws to specifically exempt DFS from the list of prohibited activities. State senator John Bonacic filed a new DFS bill in February that would bring DFS oversight under the state’s Financial Frauds and Consumer Protection Unit.

The agreement sets a June 30 deadline for legislators to pass a pro-DFS bill. Assuming legislators succeed in pushing a bill over the hurdle, Schneiderman will terminate his claims against the operators with prejudice, except for those false advertising claims. Should legislators fail to pass a DFS bill by June 30, the operators will honor the AG’s agreement until the courts render their judgment.

Should the appellate court uphold Schneiderman’s claim, the operators have agreed to maintain their real-money prohibition in the state, as well as drop their lawsuits against the AG’s office and file no further appeals. Should the courts rule against Schneiderman, the parties have agreed to continue discussions but Monday’s agreements won’t bind either party’s hands in any way.

The legal uncertainty surrounding DFS in New York has already prompted some prominent financial services companies to announce they would no longer process DFS payments for New York players. The state is a major market for both operators and the real-money prohibition could have serious impacts on both companies’ bottom lines should it persist past the September start of the new NFL season.

Since Schneiderman launched his action in November, six other state attorneys general have declared DFS to be illegal gambling while Nevada ordered DFS operators to either apply for a state sports betting license or exit the state.

Two weeks ago, FanDuel reached a deal with Texas’ attorney general to stop offering paid fantasy contests in the state, while DraftKings opted for business as usual based on its belief that they were in the legal right.

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