Illinois DFS Skirmish Continues: DraftKings, FanDuel Push On, DraftDay Exits State

Following in the wake of Wednesday’s formal opinion issued by Illinois Attorney General Lisa Madigan, which declares daily fantasy sports (DFS) to be an illegal gambling activity and thus illegal under current Illinois law, DFS giants DraftKings and FanDuel have forged ahead with plans for a legal battle against the state.

illinois-license-plateBoth DraftKings and FanDuel have announced or indicated their formal intentions to do continue operations in Illinois, citing clear “skill game” exceptions written into Illinois’ gambling statutes that the companies believe exempt them from being declared as illegal gambling under Illinois law.  The state’s gambling codes differ in that respect from the laws in New York State, where the DFS industry faces a similar, though not quite identical, legal challenge.

Illinois’ presumed DFS-legal condition – as the sites will argue – likely represents a line in the sand for an industry that can’t stand being besieged by most of the United States’ 50 state-level governments.  A couple of excerpts from DraftKings’ complaint against Madigan and the state of Illinois, filed within two days of Madigan’s own opinion, makes this perfectly clear.

First, on Illinois being a large state that would cause a ripple effect crippling the entire DFS industry, should Madigan’s stance go unchallenged:

“To be clear, this is about Illinois, but it is not just about Illinois.  And that is what makes this precipitous action so pernicious and the stakes here so consequential. The Attorney General’s opinion, if left unchecked, will not only force DraftKings to exit the State, but also have a ripple effect, irreparably harming DraftKings’ operations throughout the nation and causing it to lose customer goodwill that can never be restored.  Indeed, in suddenly declaring illegal an activity that has long been played lawfully, openly and honestly in this State, the Attorney General ignores the judicial and legislative processes already in motion, throws into turmoil the DFS industry, and affects the ability of Americans to play one of their favorite games.”

And on the “skill game” aspect, as will be stoutly argued by DraftKings:

“[] DraftKings contests are complex games of skill.  All DFS contestants act as general managers or owners of their fantasy teams, putting together their fantasy rosters from among the same pool of athletes.  In doing so, they must use their strategic know-how and ingenuity to select a lineup that will outperform their competitors’.  The strategy and skill involved in the game is indisputable.  Not only does it require an intensive knowledge of various sports, rules, athletes and statistics, but DFS players must also understand and incorporate into their gameplay the different rules and features of the fantasy contests themselves that require and reward different strategies.  They must skillfully manage a salary cap, identify “value” players who outperform their assigned salary, master a complex scoring system, and modify their strategies based on the structure of the contest itself.  A lineup that perfomrs well in one fantasy contest may not perform well in another; understanding why is part of the puzzle.  Academic scholarship, skills studies, and expert commentary all conclusively establish the significance of these strategic considerations: DFS is a classic game of skill and entirely legal under Illinois law.”

So what’s happening?  DraftKings and FanDuel are plowing ahead, while at least one smaller DFS site, DraftDay, has temporarily suspended its services to Illinois residents.  DraftKings in particular has been very active in sending information about its intent to continue operating in the state to its players there.

Here’s a recent mailing, as received by this writer, an Illinois resident, via the DK Players Alliance, a new group started up to purportedly represent DraftKings players’ interests:

Dear [player],

Last night, the Illinois Attorney General issued an opinion suggesting that Daily Fantasy Sports should not be legal in Illinois.

We disagree with this opinion and are committed to ensuring you maintain your right to play.

We believe we are in compliance with state law and today filed a complaint challenging the Attorney General’s opinion and seeking to confirm what we believe is true: daily fantasy sports are legal in Illinois. Pending that resolution, for now, you can continue to play daily fantasy sports in Illinois.

Like you, we believe that daily fantasy sports are about the challenge, the sense of community, and the excitement of every play. We will work tirelessly to bring about an outcome in Illinois that allows you to continue to enjoy the game you love.

As we work to ensure that you are able to continue enjoying DFS in Illinois and around the country, we will provide you with relevant information and updates along the way.

We would like to take this opportunity to wish you a very happy holiday season and thank you again for your continued support.

DraftKings

Both DraftKings and FanDuel also issued brief press statements in the wake of the Illinois opinion as reported earlier.  From DraftKings:

“We respectfully disagree with the Attorney General’s opinion and the reasoning behind it.  We believe daily fantasy sports, which Illinois residents have been playing for years, are lawful under state law.  We also believe, as the Attorney General has said, that this is a policy question for state legislators to address.  That is why we look forward to working with lawmakers, like Representative Mike Zalewski and others, who wish to enact thoughtful and common-sense legislation that protects consumers’ rights to compete, while also adopting appropriate consumer protections.  The company intends to promptly seek a judicial resolution of its right to offer daily fantasy sports contests to Illinois residents. As it does so, it will continue to abide by all relevant laws and will follow the direction of the courts. Pending that resolution the company will preserve the status quo.”

And from FanDuel:

“Chicago may be the best sports town in the country. It’s a city — and Illinois is a state — that plays fantasy sports like almost no other. “The League” is even set in Illinois. So why the Attorney General would tell her 13.5 million constituents they can’t play fantasy sports anymore as they know it — and make no mistake, her opinion bans all forms of fantasy sports played for money — is beyond us. Hopefully, the legislature will give back to the people of Illinois the games they love. A sports town like Chicago and a sports-loving state like Illinois deserves nothing less.”

Yet as noted, at least one smaller site, DraftDay, is willing to sit this one out, allowing big boys DK and FD to take the legal lead.  A recent mailing from DraftDay to Illinois players:

DraftDay has decided to suspend participation in ‘for-money’ tournaments by Illinois residents. DraftDay continues to closely monitor the situation in Illinois, and will reconsider this decision as circumstances warrant. In the meantime, DraftDay has refunded in-progress entry fees paid by players from Illinois.

You can log into your account and request a withdrawal at any time.

The coming week promises to bring another flurry of developments, providing a heavy dose of legal DFS happenings in what is normally a slow, between-the-holidays news cycle.  Check back at FlushDraw for the latest.

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