DraftKings, FanDuel file lawsuits against New York AG

DraftKings, FanDuel file lawsuits against New York AG

Daily fantasy sports websites DraftKings and FanDuel filed suit Friday to stop New York's attorney general from shutting down their operations on the grounds that they constitute illegal gambling.

The two businesses are asking the court to rule that their high-jackpot games are not gambling and to block the attorney general from taking actions against the companies.

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Both companies have been widely expected to file the lawsuits since they refused to pull out of New York when Attorney General Eric Schneiderman sent them cease-and-desist letters declaring their activities illegal.

“DraftKings wagers easily meet the definition of gambling,” Schneiderman said in one of the letters. “Accordingly, we demand that DraftKings cease and desist from illegally accepting wagers in New York State as part of its DFS contests.”

In its lawsuit, DraftKings called the letters “devoid of judicial authority or coherent analysis.”

The companies argue in their filings that they are legal because they offer games of skill, rather than chance, and therefore do not amount to gambling under state law.

Unlike traditional fantasy sports contests, which last over the course of a season, the games on DraftKings and FanDuel take place over much shorter periods of time. Players draft virtual “teams” of real-world players and can win jackpots — sometimes amounting to millions of dollars — if their teams succeed.

The attorney general told the companies that their “customers are clearly placing bets on events outside of their control or influence, specifically on the real-game performance of professional athletes.”

The lawsuits also claim that Schneiderman’s office attempted to pressure the companies that process payments for DraftKings and FanDuel to terminate their partnerships with the websites in New York. Losing access to the payment processors would likely hobble the services.

“When DraftKings would not back down, the Attorney General resolved to act as judge, jury and executioner,” the company said in its filing.

“His aides targeted DraftKings’ most important business partners and vendors, including the payment processors on which it depends, threatening them with adverse action if they did not immediately stop performing their contractual obligations to DraftKings in New York.”

They also asked the court to rule on the advertisements for the services that have blanketed the airwaves in recent months and suggest the promise of big paydays were not misleading, as Schneiderman had argued.

The attorney general's office indicated they were not planning to back down from their position in a statement issued on Friday.
 
"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," said Schneiderman's Communications Director Damien LaVera. "Because both companies have refused to follow the law in our state, we will take action to enforce state law."
 
In Washington, a smattering of lawmakers have called for congressional hearings on the industry and its relationship with professional sports leagues and teams. New Jersey Democrats Rep. Frank Pallone Jr. and Sen. Bob MenendezRobert (Bob) MenendezSenate rejects attempt to block Biden's Saudi arms sale Five ways Senate could change Biden's spending plan Spending bill faces Senate scramble MORE have also said that the FTC would be the appropriate venue for regulating the growing industry.

The Department of Justice is also said to be pursuing an investigation into the companies.

Meanwhile, state lawmakers and attorneys general around the country are looking to find a way to regulate the websites.

The companies, the two major players in the daily fantasy space, have hired a battery of name-brand law firms, litigators and lobbyists to fight the critics.

In the wake of Schneiderman’s letter, DraftKings hired law firm Gibson Dunn’s Randy Mastro and, on Friday, announced it has also retained renowned litigator David Boies and his partner, Jonathan Schiller.

FanDuel’s lawsuit was filed by a lawyer at white shoe firm Debevoise and Plimpton. The company has also retained a lawyer in Washington, D.C., who spoke to reporters on Wednesday.