Legal Slog Ahead for Daily Fantasy Sports in New York

Whether daily fantasy sports sites like FanDuel and Draft Kings can operate in New York now will depend on what looks like a long court battle.

On Friday, an appeals court judge in New York allowed the two companies to keep operating in the state only hours after a state Supreme Court justice had granted a request from Democratic Attorney General Eric Schneiderman for an injunction to halt operations in the state.

Schneiderman argues the sites constitute illegal gambling under state law and should be closed. They now can continue operating until at least Jan. 4, when a three-judge appellate panel will look at the issue. But whatever those judges decide likely will be appealed, as well.

The legal battle in New York is emblematic of the difficulties states are having in determining whether the burgeoning online fantasy sports industry is legal and whether it should be regulated. Lawmakers in many states, including New York, are working on legislation for upcoming sessions that would subject the games to oversight, licensing and possible taxation.

Meanwhile, the Massachusetts attorney general has proposed new regulations on the sites that are due to take effect Jan. 22. And legislation is likely in states including Pennsylvania, California, Colorado, Delaware, Georgia and Illinois starting in January.

At least one leading expert in the field, sports and gaming attorney Daniel Wallach of Becker & Poliakoff in Florida, predicts that by the end of next year, many states will have settled the issue and decided whether and how to regulate them.