NY Attorney General Investigates Daily Fantasy Sports: Latest Details, Comments

The battle between daily fantasy sports websites and New York Attorney General Eric T. Schneiderman continues with Yahoo also getting brought into the mix.

Continue for updates.

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FanDuel, DraftKings Granted Permanent Stay

Monday, Jan. 11

Darren Rovell of ESPN reported an appellate panel in New York provided the stay to the daily fantasy sites, noting the ruling means they can take business in the state of New York while the appeal is heard.

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NY Attorney General Amends Lawsuit

Friday, Jan. 1

Rovell reported that Schneiderman "filed an amended lawsuit against the two companies, this time asking for them to give back all the money they made in New York State, to give it back to those who lost money and to pay a fine of up to $5,000 per case."

Rovell noted that "restitution of funds had never been a part of Schneiderman's previous case and could be a huge blow to both companies, who took in more than $200 million in entry fees in 2015 from at least 600,000 customers in the state."

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NY Attorney General Granted Preliminary Injunction

Friday, Dec. 11

According to Reuters (h/t CNBC Now), a judge granted Schneiderman's injunction to shut down FanDuel and DraftKings in the state of New York on Friday.

DraftKings, however, is set to file an emergency appeal in the wake of the decision.

Per Rovell and David Purdum of ESPN.com, New York State Supreme Court Justice Manuel Mendez deemed that daily fantasy sports fell under the gambling umbrella: "New York State penal law does not refer to 'wagering' or 'betting,' rather it states that a person, 'risks something of value.' 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.'"

While it is known that DraftKings will appeal, FanDuel's next course of action is not yet clear, and it has not been revealed if the companies will be allowed to continue operating in New York under appeal.

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Yahoo Reportedly Issued Subpoena

Wednesday, Nov. 18

Joe Drape of the New York Times reported that Schneiderman's investigation into daily fantasy sports is expanding to include Yahoo Sports' daily fantasy games.    

"The New York state attorney general has expanded his investigation into daily fantasy sport sites, with measures including the issuance of a subpoena to the online media company Yahoo, according to a person familiar with the inquiry," Drape wrote. 

In July, per the New York Times' Vindu Goel and Drape, Yahoo announced that it was expanding its fantasy options to include daily sports. According to Drape, "Yahoo has established itself the clear No. 3 option behind FanDuel and DraftKings in terms of participation, according to SuperLobby, an independent site tracking the industry’s guaranteed-prize games."

On Nov. 10, Schneiderman gave a cease-and-desist order to DraftKings and FanDuel, ordering them to stop taking bets from New York residents and claiming it is illegal gambling by state law. Early in October, possible insider trading questions followed an incident, which led to increased scrutiny for both sites.

Brent Schrotenboer of USA Today detailed the incident:

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Then suspicions grew about possible insider trading at the companies after a DraftKings employee mistakenly leaked insider data about which players were the most popular to own that week. The leak came the same week he won $350,000 in a FanDuel contest, raising questions about whether he used such data to game the system.

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On Nov. 13, DraftKings and FanDuel filed lawsuits against the New York attorney general in response to his order a few days prior.   

According to Schrotenboer, the two sites believe that they are legally protected "under a 2006 federal law that cracked down on online gambling but exempted paid fantasy sports," even though the report noted that law passed before daily fantasy sports rose in prominence. 

Schneiderman's official statement, per Schrotenboer, further explains the cease-and-desist order given to FanDuel and DraftKings:

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Online sports gambling sites are illegal in New York. DraftKings and FanDuel are operating illegal sports betting websites under New York law, causing the same kinds of social and economic harms as other forms of illegal gambling. As a result, our office issued a cease and desist letter to stop them from violating state law by accepting bets from people in New York. Because both companies have refused to follow the law in our state, we will take action to enforce state law.

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Per ESPN.com's Darren Rovell, on Monday, Nov. 16, DraftKings and FanDuel were denied a temporary restraining order against Schneiderman requested by a New York Supreme Court Justice. Another court date is scheduled for Nov. 25. 

Yahoo's subpoena is an extension of Schneiderman's crusade against daily fantasy sports sites, with Drape's report noting Yahoo still accepts bets from New York-based users. A Yahoo spokesman said in a brief statement provided to Drape the site believes it offers "a lawful product for our Daily Fantasy Sports users."

Rovell included a statement from Josh Schiller, who is part of the DraftKings' legal team, stating the site plans plans to continue honoring business from New York customers and that Schneiderman "assured" DraftKings he wouldn't take legal action against the site before that Nov. 25 court date.

"We look forward to our day in court," Schiller's statement read. "Daily fantasy sports are not an illegal gambling operation, and there's no credibility to the argument that season-long fantasy could be legal while daily fantasy isn't. Daily fantasy requires more skill and less chance."

One particular part of next Wednesday's court date is expected to include DraftKings presenting a study from Gaming Laboratories International in which "lineups selected by skilled fans beat randomly generated lineups more than 80 percent of the time in all four major sports," per Rovell's report. 

Rovell also mentioned lawyers for DraftKings are using a previous case in New Jersey to claim that daily entry fees for fantasy sports websites are different from a gambling wager. 

"As for DraftKings itself, it can't be considered a bookmaker, the filing argues, because the company is a third party that doesn't make more or less with any action," Rovell wrote. "DraftKings takes a percentage of the action and only makes more through more entry fees."

Fantasy sports in the United States are a massive business, with Forbes' Brian Goff reporting in 2013 fantasy football alone was a $70 billion market. 

New York's argument against the sites is that it constitutes gambling, while the sites' leaders maintain that it is a business and they are doing nothing to break any laws.