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Matt StevensonNovember 19, 2015
February 02, 2018

New York Attorney General Bans Daily Fantasy Sports

Sports gambling has been a touchy subject in the U.S. for decades. It seems like every week there’s a new bill introduced or dialogue that would illegalize some aspect of online betting, whether it’s sports related or not.

Current events clearly demonstrate that sports betting is still fighting an uphill battle. Last week the New York State Attorney General issued an order to both DraftKings and FanDuel to stop receiving entries from residents of New York. The two sites are the biggest names in daily fantasy sports – a type of online sports betting that pits players against each other by creating fantasy sports teams whose victories or failures depend on real game stats from actual players. New York State now joins a list of six other states that currently have bans on daily fantasy sports: Montana, Louisiana, Washington, Iowa, Arizona and Nevada.

New York Attorney General Eric Schneiderman issued the cease-and-desist order to FanDuel and DraftKings on November 10th, effectively prohibiting New York residents from registering and actively betting on those sites. This decision comes after an investigation prompted by a DraftKings employee winning $350,000 on FanDuel, supposedly by using internal betting info that wasn’t available to the public. The main debate has centered on whether or not daily fantasy sports are a game of luck or a game of skill. The line is a thin one, but it can mean the difference between being legal and being illegal.

Federally, daily fantasy sports are considered to be legal because they are games of skill, as declared in the Internet Gambling Prohibition Act of 1999 (which was amended in 2006 to exempt daily fantasy betting). If you’re interested in learning more about this, the cliff notes for this law can be found here.

Fantasy sports operators continue to insist that their games are based in skill and not luck and are therefore exempt from the law. After the order was issued, FanDuel said in a statement:

“Fantasy sports is a game of skill and legal under New York state law. This is a politician telling hundreds of thousands of New Yorkers they are not allowed to play a game they love…”

DraftKings has things to say about the Attorney General as well. According to a New York Times article, a spokeswoman for DraftKings made the following statement in regards to the Attorney General’s demand:

“We’re disappointed he hasn’t taken the time to meet with us or ask any questions about our business model before his opinion.”

She stated that half a million New York residents will be shut out from using daily fantasy sites. If what the spokeswoman said is true, there was no dialogue between the NY Attorney General and the daily fantasy operators before the cease-and-desist was issued. Interesting.

What’s also interesting is the fact that the Attorney General only targeted those two operators, DraftKings and FanDuel. There was no mention anywhere of any other sites, such as Yahoo Sports, which offers virtually the same daily fantasy betting as FanDuel and DraftKings. Was this an intentional slight from the Attorney General against these two companies, or was he just getting warmed up with them since these are the two sites that have been getting the most media coverage?

There’s no denying that the ad campaigns for the two sites have been massive. It’s near impossible to watch a football game on television without seeing commercials from at least one of the sites sprinkled between the plays. These big media pushes have brought the daily fantasy discussion into the national spotlight, and the divide over the issue is growing every day.

The issue has even been discussed on the popular HBO show “Last Week Tonight with John Oliver.” In the episode, he makes the flimsy argument that daily fantasy sports are a game of luck simply because it’s almost impossible for casual players to win out over the “numbers nerds,” those sports actuaries and mathematical geniuses who can crunch player stats like there’s no tomorrow.

But wait, if people can game the system to that extent, it would mean the winners aren’t chosen randomly by an algorithm. The winners are the people who know how to play the game best. And isn’t that the textbook definition of a game of skill? I think that argument fell flat.

But I digress. The fact is, there are 500,000 New York residents that are no longer allowed to participate in daily fantasy sports betting. You can be sure that those people are not happy with the Attorney General’s decision. And truth be told, many other states might start having conversations about its legality – most likely of these is New Jersey, which has its own set of murky gambling laws.

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