Daily fantasy sports operator DraftKings is exiting the state of Hawaii after a city prosecutor issued a cease and desist order.
Last week, Hawaii state Attorney General Doug Chin issued an opinion that DFS was illegal gambling under state law. On Monday, Honolulu city prosecutor Keith Kaneshiro sent letters to both DraftKings and FanDuel ordering them to “immediately cease and desist” their dealings with customers in Oahu.
FanDuel has yet to comment on the C&D order but DraftKings’ high-priced attorney David Boies issued a statement saying that, while the company disagreed with Chin’s opinion, it would “voluntarily pause operations” in Hawaii. Boies said DraftKings would continue its “constructive engagement” with state legislators in the hopes that they would swiftly pass bills exempting DFS from state gambling laws.
The Boston Globe quoted a source claiming that DraftKings was nobly foregoing an admittedly small chunk of its overall revenue in order to protect its players, based on the company’s belief that Chin’s opinion suggested DFS players could face their own charges if they continued to play with the site.
Chin’s opinion did cite a 1961 state Supreme Court case in which a Hawaiian resident was convicted for playing the amusement park game Fascination. But Chin cited the case because it hinged on whether the game was one of skill or chance, not (presumably) because he was signaling his desire to round up DFS players and throw them into a local volcano.
It’s far more likely that DraftKings played their martyr card because they can afford to lose a tiny market like Hawaii (population 1.4m), much as they could survive exiting Nevada (3m), where regulators ordered DFS operators to apply for state gambling licenses or GTFO.
New York is so far the only other state to go down the cease & desist route, which prompted DraftKings to unleash all its legal dogs of war because DraftKings can’t afford to lose the New York market.
DraftKings is bleeding money in courtrooms across the nation, fighting similarly negative AG opinions in states like Illinois and trying to prevent skittish payment processors from bailing on the DFS industry. DraftKings and its rival FanDuel are also spending big to lobby state and federal legislators to avoid future legal bills. Opening another legal tab for a market the size of Hawaii is simply a non-starter, so spare us the ‘we’re doing it for the kids’ rhetoric.
