FanDuel, DraftKings Agree to Stop Operating Paid Contests in New York

Joseph ZuckerFeatured ColumnistMarch 21, 2016

FILE - In this Sept. 9, 2015 file photo, an employee in the software development department of DraftKings, a daily fantasy sports company, walks past screens displaying the company's online system stats in Boston. Top daily fantasy sports companies are fiercely rejecting the idea that their rapidly-growing industry should be considered gambling in the United States. But FanDuel and DraftKings are OK with that label in the United Kingdom. They’re embracing it as a step toward global expansion. U.K. gambling regulators granted a gambling license to DraftKings in August, while FanDuel applied earlier this month for a license as a “gambling software” company. (AP Photo/Stephan Savoia, File)
Stephan Savoia/Associated Press

The New York attorney general's office announced Monday that FanDuel and DraftKings will cease offering paid competitions in the state immediately, per's David Purdum.

As part of the deal with the two companies, New York Attorney General Eric Schneiderman will halt legal proceedings that could have resulted in potential restitution paid to those who lost money on the sites.

Schneiderman posted a full statement to his Twitter account:

In November 2015, Schneiderman issued a cease-and-desist order to DraftKings and FanDuel. The state received an injunction against the two companies, which would have prevented them from operating out of New York altogether. In an emergency hearing, however, DraftKings and FanDuel successfully appealed the decision in the Appellate Division of the New York Supreme Court.

In January, Schneiderman amended the lawsuit against DraftKings and FanDuel to include up to $5,000 in restitution to each individual who lost money playing on the sites.

The New York Senate drafted a bill in February that would allow daily fantasy sports in the state. Companies would be required to pay a one-time $500,000 registration fee, and their gross revenue from the state would be taxed at 15 percent.

In addition, the New York state legislature created an avenue to legalize daily fantasy sports by including a measure in the Senate's budget to allow regulation by the Department of Financial Services, per Joseph Spector of the Press & Sun-Bulletin.

"Everything, of course, is subject to court decisions," said John Bonacic, chairman of the Senate Racing and Gaming Committee, per Spector. "But it's basically we're sending a message to the court that we're prepared in the state of New York to allow daily fantasy sports to continue—providing it's monitored, it's regulated and there are consumer protections."