DFS Sites Granted Temporary Stay, Can Continue to Operate in New York

Fantasy sports fans can play on in New York, at least for now. The same day that New York Supreme Court Judge Manuel J. Mendez granted New York Attorney General Eric Schneiderman an injunction to block daily fantasy sports (DFS) leaders DraftKings and FanDuel from operating in the state, state appellate Judge Paul Feinman granted the sites a temporary stay. As such, they can still offer games to customers in New York until at least January.

The legal battle between Schneiderman and the DFS sites dates back about a month, when after an investigation, Schneiderman declared DFS to be illegal gambling and issued cease and desist letters to both DraftKings and FanDuel. In a statement issued to the public, Schneiderman minced no words, saying:

Our investigation has found that, unlike traditional fantasy sports, daily fantasy sports companies are engaged in illegal gambling under New York law, causing the same kinds of social and economic harms as other forms of illegal gambling, and misleading New York consumers. Daily fantasy sports is neither victimless nor harmless, and it is clear that DraftKings and FanDuel are the leaders of a massive, multi-billion-dollar scheme intended to evade the law and fleece sports fans across the country. Today we have sent a clear message: not in New York, and not on my watch.

The two sites immediately filed for a temporary restraining order, but Judge Mendez denied it. FanDuel decided to stop permitting New Yorkers to play shortly thereafter, but DraftKings remained stubborn, keeping its site open to those within New York’s borders.

newyorkpostcardIn late November, legal teams from both of the DFS sites appeared in a hearing before Mendez to argue their cases; Mendez decided to take his time in making his ruling, rather than issuing it then and there. Thus, on Friday, he officially granted Eric Schneiderman’s injunction against DraftKings and FanDuel, writing, in part, “Upon a reading of the foregoing papers it is ordered that the motion by Eric T. Schneiderman, in his official capacity as attorney general of the state of New York, for an order seeking injunctive relief, enjoining and restraining [DraftKings / FanDuel] from doing business in the state of New York, and from accepting entry fees, wagers or bets from New York consumers in regards to any competition, game or contest run on defendant’s website is granted.”

In their arguments to Judge Mendez, the lawyers from both sites leaned heavily on a decision in the Humphrey v. Viacom (2007) case, saying that they were taking “entry fees” from players for their fantasy sports contests, not “bets” or “wagers,” and thus were not violating state gaming laws. Mendez didn’t buy it, writing, “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.’”

After the decision was handed down, the sites filed for an emergency temporary stay in appeals court, a stay which was granted by Judge Paul Feinman. Thus, DraftKings and FanDuel are now allowed to continue operating in New York, likely until at least January 4th. In January, a five-judge panel will hear arguments from both sides and render a decision.

After the temporary stay was issued, FanDuel published the following statement on its website:

On behalf of our users in New York, we are pleased to report that this afternoon, an appellate court in New York granted our request for an emergency stay of the injunction issued this morning.  Based on the appellate court’s ruling, New Yorkers can continue to enjoy FanDuel contests while the legal process moves forward.

Here is what that means for you:

First, if you have funds currently deposited on FanDuel, you can resume play this weekend.  Our team has removed the block on New York and you should be able to access the site on all platforms.

Second, unfortunately, we are not accepting new deposits from players in New York at this time.  We continue to evaluate the situation and will provide you an update as soon as we have any changes to announce.

Third, the Appeals Court decision is not permanent. This decision will be reviewed by a panel of judges early next month.

Finally, if you are a New Yorker and you love playing fantasy, we need you to send an email to your legislator supporting this cause. Send your representatives an email using our simple online tool that says you support a law that protects your right to play fantasy.

Fantasy sports teaches us that you’re only as good as the team around you, and we are, as always, honored to have you on our team. We will always have your back, and we appreciate you having ours.

DraftKings lawyer David Boies said, “We look forward to a full and fair hearing and are confident we will demonstrate clearly to the court why we should be able to continue to offer our DFS games in New York permanently.”

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