Daily Fantasy Crime?

December 8, 2015
CLARK.LAW

For daily fantasy sports sites such as DraftKings and FanDuel, 2014-15 has been their moment.  They have been making money hand over fist and people haven’t yet figured out that probably aren’t going to win.  If you are somehow unfamiliar with these sites (such as not having been in front of a television for two years) the basic premise is to allow customers to participate in daily or weekly fantasy sports contests for a fee. Members have the opportunity to win large sums of money based on the outcomes of particular sporting events. Memberships are free, but you have to pay to play (and have a chance at winning).
Legally, the big question surrounding these sites is the same one that we have been debating relative to online poker for 15 years or so now – whether the outcome of these contests depends predominantly on chance or a player’s skill.  In many states the answer determines whether or not these activities are illegal, and recently another state’s authorities have weighed in with an opinion.
The state of Nevada recently demanded that FanDuel and DraftKings cease all activity in the state claiming that it’s acting as an illegal gambling operation. To date, these sites have not complied with this order. New York Attorney General Eric Schneiderman has now followed suit and has sent cease and desist letters to both companies demanding that they discontinue operations in the state unless each can prove it’s not undertaking an illegal gambling operation.
As part of its class action suit, Attorney General Schneiderman claims that sites like DraftKings and FanDuel take advantage of a loop-hole in a 2006 statute that allows it to operate as a game of skill rather than a game of chance.
Since filing its action, New York has since amended its compaint to include credit card companies including Visa, MasterCard, and American Express, as well as PayPal, among others, as “facilitators” of illegal gambling.  This is a tactic of Attorney General Schnedierman to bring pressure to the vendors who are doing business with daily sports operators.  Whether New York will ultimately be successful in banning daily fantasy sports remains to be seen, but one thing is certain – FanDuel and Draft Kings are second guessing their respective decisions to rent high dollar office space in Manhattan only a few months ago.

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