New York appeals court approves stay for DraftKings, FanDuel pending ruling

Friday, December 11, 2015
In this Sept. 9, 2015,photo, Len Don Diego, marketing manager for content at DraftKings, a daily fantasy sports company, works at his station at the company's offices in Boston.
Stephan Savoia, File

NEW YORK -- The New York state Court of Appeals approved a stay for DraftKings and FanDuel Friday afternoon, which will allow them to continue business in New York state while awaiting another ruling.

Earlier, a judge ruled the fantasy sports sites could no longer do business in New York for now, cutting off one of their biggest customer bases as the state attorney general and sites face off over whether their business amounts to illegal gambling.

FanDuel, which already had suspended play from New York because of the court fight, and DraftKings said they would immediately appeal the ruling.

The dispute between the nation's two biggest daily fantasy sports sites and Attorney General Eric Schneiderman is reflecting debate nationwide about whether playing fantasy sports is betting. Manhattan state Supreme Court Justice Manuel Mendez didn't make a final declaration on that question.

But "the protection of the general public outweighs any potential loss of business" while the case plays out, he wrote, adding that "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 "' - part of the legal definition of gambling in New York.

Schneiderman said he was pleased with the ruling, which comes as states around the country grapple with whether and how to regulate the growing industry. Both DraftKings and FanDuel have said they have hundreds of thousands of customers in New York, and Schneiderman's office has estimated the two companies account for 90 to 95 percent of the daily fantasy sports market.

The case only directly mentions them, and it's not immediately clear how the ruling might affect other companies in the industry. Schneiderman's office declined to comment on that question but also has subpoenaed information from Yahoo, which also offers daily fantasy sports in New York. Yahoo has said it believes it's offering a "lawful product."

DraftKings and FanDuel argue their contests are highly competitive games of skill, not gambling.

"We remain committed to ensuring all fantasy sports are available to New Yorkers, and will work to bring our product back to sports fans around the state through our appeal and working with the legislature to enact sensible regulations for fantasy sports," New York-based FanDuel said in a statement. "Today's preliminary decision was wrong, and we expect we will ultimately be successful."

A lawyer for Boston-based DraftKings, David Boies, said its business was legal and it believed the "status quo should be maintained while the litigation plays out."

The attorney general has said that while the games can involve some skill, that doesn't make them legal, since ultimately how customers fare depends on events out of their control, such as professional athletes' injuries, weather or even blown calls.

Most states have no laws that specifically address fantasy sports but do have gambling laws that might dictate whether they're legal. In Washington, the gambling commission specifically concluded that fantasy sports wagering is illegal. Massachusetts lawmakers have proposed specific regulations to protect consumers, while regulators in Nevada have restricted daily fantasy sports to existing casinos.

In New York, the chairman of a state legislative committee with authority over gambling predicted this week that the state will ultimately legalize and regulate daily fantasy sports, regardless how the court fight turns out. The state already has legalized some forms of gambling, including lotteries, betting on horse racing, video slot machines at racetracks and a number of forthcoming casinos.

State Assembly Racing and Wagering Committee Chairman J. Gary Pretlow said Friday that lawmakers must await further court rulings before determining whether the Legislature could legalize daily fantasy sports by changing the penal code, or whether it would require a state constitutional amendment.