In a setback for daily fantasy sports websites like DraftKings and FanDuel, a New York State Supreme Court justice on Friday upheld a preliminary injunction against the sites issued by the state’s attorney general last month.
The ruling comes as many other states are working on legislation for upcoming sessions that would subject the games to oversight or licensing. Pennsylvania and California are leading the way. But Colorado, Delaware, Georgia and Illinois are interested, too. Meanwhile, the Massachusetts attorney general has proposed new regulations on the sites that are due to take effect Jan. 22. And just this week, the New York Legislature had a hearing on whether to legalize and regulate the fantasy sites.
In his ruling Friday, Justice Manuel Mendez agreed with Democratic Attorney General Eric Schneiderman that the daily fantasy sports companies are operating illegal gambling sites based on the definition of gambling under New York law. “New York State penal law does not refer to ‘wagering’ or ‘betting,’ rather it states that a person, ‘risks something of value,’ ” Mendez wrote. “The payment of an ‘entry fee’ as high as $10,600 on one or more contests daily could certainly be deemed risking ‘something of value.’ ”
Lawyers for the two websites have said they are games of skill, not chance, and thus outside the New York law.
The injunction will prohibit the fantasy sports sites from doing business in New York, pending more court action. Schneiderman had issued a “cease and desist” order to the companies in November, telling them they had to stop taking New Yorkers’ money. FanDuel stopped letting New Yorkers play the games after receiving the letter, but DraftKings continued operating, Reuters reported. The new ruling effectively bars that.
DraftKings and FanDuel said in separate statements that the companies would appeal.
“Daily Fantasy Sports contests have been played legally by New Yorkers for the past seven years and we believe this status quo should be maintained while the litigation plays out,” DraftKings lawyer David Boies said in a statement.
FanDuel said: “We will be appealing — 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.”