Fantasy Sports

As daily fantasy sports (DFS) became incredibly popular and profitable, two DFS enterprises, FanDuel and DraftKings, emerged as the biggest players.

In the fall of 2015, their TV ads were everywhere. The two companies spent more money on advertising than beer companies as they both competed for players. It was also about that time that a number of states began suing DraftKings and FanDuel, claiming they were violating gambling laws. Suddenly, both companies found themselves besieged by critics.

So these competing rivals got to be a little friendlier. No doubt their legal teams compared notes and their top executives chatted from time to time. Their lobbyists probably worked together to persuade various state legislatures to exempt DFS from gambling laws.

Now, it appears critics of FanDuel and DraftKings may have driven them into one another's arms, with various publications reporting the two companies are poised to merge with each other. Bloomberg News quotes sources familiar with the discussions as saying DraftKings co-founder Jason Robins will lead the combined enterprises while FanDuel co-founder Nigel Eccles will serve as chairman of the board. Neither company has commented on the reports.

Investors would like to see it

The investment community has been cheering for a possible merger for some time, pointing out that the two companies have nearly identical games that could neatly fit under one operation. A combined company would not need to spend nearly as much on advertising.

Like any potential merger, there would likely be anti-trust concerns. The two companies reportedly control about 90% of the DFS market. In 2015, there were more than 57 million people in the U.S. and Canada playing DFS games, according to the Fantasy Sports Trade Association.

However, more recent research suggests the growth of DFS is slowing and that there are fewer new players choosing to participate. That could be strong incentive for both DraftKings and FanDuel to join forces, with savings on ad spending going straight to the bottom line.

The long and bitter war between the two major daily fantasy sports (DFS) enterprises and the state of New York has reached a peaceful conclusion.

New York Attorney General Eric Schneiderman has reached separate $6 million settlements with both companies, which run games where players can win money based on the performance of actual players on their “fantasy” teams.

Last fall, as DFS games were reaching their height of popularity, Schneiderman sued both DraftKings and FanDuel, claiming both were in violation of New York's gambling laws. The two companies fought the suits, saying they offered games of skill, not chance.

In the end, the settlement revolves around Schneiderman's charges that both companies engaged in false and deceptive advertising. The complaint alleged both companies misled novice players about their chances of winning, giving “false and misleading” statistics about the odds.

During the protracted litigation, Schneiderman secured an injunction preventing both companies from offering games to New York residents. Between March and August, the companies were not allowed to accept money from New Yorkers.

Terms of the settlement

In agreeing to terms, both DraftKings and FanDuel agreed to change marketing practices, providing clear disclosure of terms and conditions and information about expected performance.

“Today’s settlements make it clear that no company has a right to deceive New Yorkers for its own profit,” Schneiderman said in a statement. “DraftKings and FanDuel will now be required to operate with greater transparency and disclosure and to permanently end the misrepresentations they made to millions of consumers. These agreements will help ensure that both companies operate, honestly and lawfully in the future.”

The issue of whether DFS violates New York's gambling laws went away in August, when New York enacted legislation that specifically says DFS is a legal activity. Most other states have enacted similar laws.

Fantasy sports began as an informal hobby among sports enthusiasts. These informal “leagues” lasted an entire season, with participants getting points each week based on how their players performed in real games.

DFS made it a professional enterprise, allowing participants to form different teams daily or weekly, winning money if their “team” won. Critics said there was little difference between that and betting on the outcome of a game.

Under fire from seemingly all sides, daily fantasy sports (DFS) enterprises DraftKings and FanDuel are reportedly dropping all college games and will go pro.

Sports network ESPN quotes statements from both companies, saying that extensive discussions with the NCAA led them to take this voluntary action. Statements to ESPN by the two companies say the last college games they will offer will be the men's NCAA Final Four and Championship, played this weekend and Monday.

ESPN quotes a statement from FanDuel, saying it reached its decision after months of conversations with the NCAA, member schools, and various state legislators.

"It is clear that this is an issue that matters to a variety of constituencies and we feel that the best path forward is to suspend offering these contests pending resolution on the issue within state legislatures," said FanDuel in a statement to ESPN.

DraftKings issued a similar statement, agreeing that suspending college games from its lineup is the "best path forward for the industry at this time."

After both companies' burst of high-profile success in the second half of a large year, a number of states have questioned the legality of the games, which were classified as games of skill under federal gambling statutes.

But several states, most notably New York, have accused DraftKings and FanDuel of operating games of chance in violation of state laws against gambling. Since then, both companies have stepped up their lobbying efforts, seeking state laws that would make their games an exception.

Virginia passed such a law earlier this year. Other states are considering similar action.

If you had put money on DraftKings and FanDuel, the two daily fantasy sports (DFS) giants, prevailing over New York Attorney General Eric Schneiderman, you would have lost money.

Schneiderman issued a statement Monday, saying his office had reached settlements with both DraftKings and FanDuel, which calls for both companies to no longer accept players from New York state.

“I’m pleased to announce that both FanDuel and DraftKings will stop taking bets in New York State, consistent with New York State law and the cease-and-desist orders my office issued at the outset of this matter,” Schneiderman said in his statement. “As I've said from the start, my job is to enforce the law, and starting today, DraftKings and FanDuel will abide by it.”

Schneiderman sued both companies in October, claiming their DFS games amounted to illegal gambling. After he issued a cease and desist order, both companies appealed, saying their games require skill and are legal under federal law.

Raising the ante

Then Schneiderman raised the ante, amending his complaint to demand civil damages from the two companies and to require them to pay millions in restitution to New York players who had lost money.

Knowing when to hold 'em and when to fold 'em, the two companies agreed to give up the lucrative New York market, at least for now. In its statement, DraftKings suggested the withdrawal from New York might be temporary.

“We will continue to work with state lawmakers to enact fantasy sports legislation so that New Yorkers can play the fantasy games they love,” the company said.

Earlier this month, Virginia became the first state to enact legislation that specifically declares DFS games to be legal. Both companies are actively encouraging other states to take similar action.

Schneiderman, meanwhile, made it clear his case against DraftKings and FanDuel has not been affected by the settlement. He said he will continue to press false advertising and consumer fraud charges in court.

Virginia has become the first state to formally establish the legality of daily fantasy sports (DFS), which many other states have declared to be illegal gambling.

Virginia Governor Terry McAullife signed a measure passed by the Virginia General Assembly in late February.

For those who watched no television during the late summer and early fall, and thus missed the thousands of TV commercials for DraftKings and FanDuel, DFS is, in fact, a lot like gambling.

Instead of betting on teams to win or beat the spread, DFS players assemble fantasy teams of actual players who compete in an actual league. They are assigned points for how well each player performs in a given game and the DFS league player with the most points wins money. Those who don't win forfeit the money they paid to play.

See, a lot like gambling. So much so that a handful of states declared the games illegal from the get-go. Nevada later declared them to be gambling, followed by New York, where Attorney General Eric Schneiderman has gone to court seeking restitution for players and civil penalties.

The Virginia legislation, in effect, says the games are legal, whether they are gambling or not. DFS enterprises like FanDuel and DraftKings, that allow players from Virginia to participate, must pay a $50,000 fee to the state.

Provisions

Other provisions of the new law include:

• Requiring fantasy sports sites to implement policies intended to verify that all participants are 18 years or older

• Preventing the sharing of confidential information that could affect fantasy contest play with third parties until the information is made publicly available

• Requiring player funds to be segregated from a company’s operational funds

• Banning employees of fantasy sports sites (as well as relatives living in the same household) from competing in public fantasy sports contests for cash prizes on any site, and

• Requiring fantasy sports companies to undergo two independent yearly audits of their operations to ensure compliance with all regulations.

A spokesman for FanDuel said the company hopes other states that have questioned DFS' legality will pass similar legislation.  

While DraftKings and FanDuel battle with New York and other states that have accused the daily fantasy sports leaders of running illegal gambling operations, one state has moved in the other direction.

The Virginia General Assembly passed a measure on Wednesday setting up a legal framework for daily fantasy sports games. It was sent to Gov. Terry McAuliffe. who is expected to sign it.

Should he do so, Virginia would become the first state to formally recognize the popular games as legal.

DraftKings responds

"Today the Virginia General Assembly took an important step toward ensuring that fans in Virginia can continue to enjoy fantasy sports contests with thoughtful and appropriate consumer protections in place,” DraftKings' spokesman Grifin Finan said, in a statement emailed to ConsumerAffairs. “We thank Delegates Jackson Miller and Marcus Simon and Senator Ryan McDougle for their leadership in bringing a common sense regulatory framework through the legislature. We are grateful for their support and are actively engaged with dozens of legislatures around the country to replicate this success.”

According to DraftKings, more than 56 million Americans and 1.2 million Virginians play fantasy sports each year in a variety of sports, including football, baseball, basketball, hockey, and golf.

Bipartisan support

The legal framework measure cleared both houses of the Virginia legislature with bipartisan support. The measure would require daily fantasy companies to register with the state and pay a $50,000 application fee.

The Virginia action stands in stark contrast to New York, where Attorney General Eric Schneiderman has sued both DraftKings and FanDuel, charging them with violating New York's gambling laws.

In early January, Schneiderman amended his complaint, asking the court to order the two companies to pay civil damages and make restitution to New York players who lost money. An appeals court is currently considering the case.

Thanks to intense lobbying, many states that have suggested that daily fantasy sports (DFS) sites like DraftKings and FanDuel engage in illegal gambling are now considering laws to allow exceptions.

DFS leagues have gotten around federal gambling statutes because they have been declared games of skill instead of luck. Players choose “teams,” made up of real players, and get points for how well the players perform during a given game.

In illegal gambling, players choose a team and are rewarded if the team wins a particular game, or performs better than expected – beating the odds.

A number of attorneys general have looked at DFS and decided “if it looks like a duck, and walks like a duck, it's probably a duck.”

Illinois declares illegal

In Illinois, Attorney General Lisa Madigan is among them. She issued an opinion in December that declared DFS games to be in violation of the state's gambling laws.

“Absent legislation specifically exempting daily fantasy sports games from the gambling provisions, it is my opinion that daily fantasy sports contests constitute illegal gambling under Illinois law,” Madigan concluded.

In Illinois, and a number of states, legislatures are, in fact, considering measures that would declare that, while DFS might in fact look an awful lot like gambling, it really isn't.

Big spenders

The Wall Street Journal reports that the industry's lobbying arm is spending big – as much as $10 million – to support DFS-friendly legislation in all but 16 states – even states that have not yet taken a position on the legality of DFS.

In late January, the Tampa Bay Times reported legislation to establish the legality of DFS is making progress in the Florida legislature. While most states considering legalization would tax DFS revenue, the Florida legislation would require major DFS companies to pay $500,000 to register with the state.

As we reported back in October, the huge popularity of DFS, the involvement of major media companies and sports leagues, and the mountains of cash involved, all suggested that DFS was already “too big to fail.”

With some states already moving aggressively against the established DFS enterprises – most notably New York and Nevada – it might not be surprising that the industry is moving quickly to shore up its legal position in the rest of the states – perhaps before the start of baseball season.

There could be more trouble on the horizon for daily fantasy sports (DFS) enterprises and players in Texas who participate.

Texas Attorney General Ken Paxton is the latest state law enforcement representative to suggest the games offered by FanDuel and DraftKings amount to illegal gambling.

“It’s my duty as Attorney General to look to the law, as passed by the people’s representatives, to answer the questions put to this office,” Paxton said in a statement. “Paid daily ‘fantasy sports’ operators claim they can legally operate as an unregulated house, but none of their arguments square with existing Texas law. Simply put, it is prohibited gambling in Texas if you bet on the performance of a participant in a sporting event and the house takes a cut.”

Paxton issued an opinion requested by a Texas state representative. Rep. Myra Crownover, Chair of the Committee on Public Health. She asked Paxton whether the sports leagues are permitted under Texas law and whether it is legal in fantasy where the “house” does not take a cut.

Informal leagues are fine

Paxton said he believes, as a general rule, informal fantasy leagues where participants split any money among themselves are legal. But, he says, DFS enterprises are wrong in claiming an actual-contestant exception, which applies only to contestants in an actual skill or sporting event. And unlike some other states, Texas law only requires “partial chance” for something to be gambling. It does not require that chance predominate, he said.

“It is beyond reasonable dispute that daily fantasy leagues involve an element of chance regarding how a selected player will perform on game day,” Paxton wrote in the opinion. “The participant's skill in selecting a particular player for his team has no impact on the performance of the player or the outcome of the game.”

Other states

Texas is just the latest state to look at DFS with a skeptical eye. In New York, Attorney General Eric Schneiderman has sued both FanDuel and DraftKings in an effort to force them to stop accepting players from the state.

Additionally, Schneiderman has asked the court to order the two companies to return money spent by New Yorkers and pay civil damages. An appeals court will hear the suit and, in the meantime, has granted the two companies a stay so that New Yorkers may continue to play until the case is decided.

Last month, Illinois Attorney General Lisa Madigan issued a similar opinion, saying it is her belief that DFS violates Illinois gambling laws.

Unlike New York, however, Illinois may move to change state law to make the highly popular games legal. Madigan disputes the claim that daily fantasy sports are protected under a 2006 federal law, pointing out that law specifically leaves it up to the states to determine whether the games are, in fact, gambling.

Madigan notes that legislation is currently pending in both Illinois legislature chambers to create a new act – the Fantasy Contests Act. The proposed law, Madigan says, would specifically exempt fantasy contests from the general prohibition against gambling.

Without passage of the law, says Madigan, Illinois residents playing daily fantasy sports games are breaking the law.

Daily fantasy sports (DFS) enterprises DraftKings and FanDuel are celebrating a New York appellate court ruling, granting them a stay and allowing them to accept players from New York.

New York Attorney General Eric Schneiderman had secured a court order, requiring both companies to stop accepting players from New York, claiming the games constitute illegal gambling. The companies won a stay Monday, allowing them to continue operating in the state until the court can make a final ruling.

“We are pleased with the Court’s ruling today,” said David Boies, counsel to DraftKings, in a statement emailed to ConsumerAffairs. “Daily fantasy sports contests are as legal now as they have been for the past seven years that New Yorkers have been playing them. As our litigation continues, we expect an appellate court to see what we have known since the outset: DFS is a game of knowledge and skill, one that builds community and whose competitive spirit has become important to the lives of millions of people.”

Upping the ante

Schneiderman strongly disagrees. In his most recent action in the case, he amended his complaint to require both DraftKings and FanDuel to repay all money spent by New Yorkers to play the games. He also asked the court for a $5,000 fine per case – a fine that would run into the billions of dollars.

In his complaint to the court, Schneiderman said the games are not games of skill, as the companies claim, but simply games of chance. Boies says he's confident the court will see it differently.

“Our ongoing appeal will make clear that daily fantasy contests require just as much skill as season-long contests, which the attorney general recognizes as perfectly legal under state law,” Boies said.

In an opinion requested by two state legislators, Illinois Attorney General Lisa Madigan says she believes daily fantasy sports games provided by enterprises like FanDuel and DraftKings constitute illegal gambling, in violation of Illinois law.

While not carrying any legal force, the attorney general's opinion provides a clear indication that the state government would have grounds to stop the games in Illinois, joining New York and Nevada, though the latter has ruled games may seek licenses.

The opinion was sought by two members of the Illinois legislature who sit on the Criminal Committee. Rep. Elgie Sims, Jr., is chairman of the committee and Rep. Scott Drury is vice-chairman.

“It is my opinion that the daily fantasy sports contests offered by FanDuel and DraftKings clearly constitute gambling under subsection 28-1(a) of the Criminal Code of 2012 and that the exemption set forth in subsection 28-1(b) does not apply,” Madigan wrote.

Move to legalize?

Unlike New York, however, Illinois may move to change state law to make the highly popular games legal. Madigan disputes the claim that daily fantasy sports are protected under a 2006 federal law, pointing out that law specifically leaves it up to the states to determine whether the games are, in fact, gambling.

Madigan notes that legislation is currently pending in both Illinois legislature chambers to create a new act – the Fantasy Contests Act. The proposed law, Madigan says, would specifically exempt fantasy contests from the general prohibition against gambling.

Without passage of the law, says Madigan, Illinois residents playing daily fantasy sports games are breaking the law.

“Absent legislation specifically exempting daily fantasy sports games from the gambling provisions, it is my opinion that daily fantasy sports contests constitute illegal gambling under Illinois law,” Madigan concluded.

In October, Nevada ordered a halt to daily fantasy sports games in the state, ruling that they are unlicensed gambling. The following month, New York Attorney General Eric Schneiderman obtained a court order prohibiting New Yorkers from playing the games, though FanDuel successfully argued for a stay, pending an appeal.

Many daily fantasy sports (DFS) players who live in New York were able to field teams over the weekend, as an appellate court granted an emergency injunction, staying a judge's order from earlier in the day that appeared to signal the end of these games.

Confused? You're hardly to blame. With so much money at stake, the DFS enterprises of Fan Duel and DraftKings will pull out all the legal stops to keep the games alive. This high-stakes game is far from over.

The DFS games, incredibly popular nationwide, were declared illegal gambling by New York Attorney General Eric Schneiderman, who filed suit to enforce a cease and desist order. Early in the day, it appeared that he had won.

New York Supreme Court Justice Manuel J. Mendez granted Schneiderman's motion to enjoin DraftKings and FanDuel “from doing business in the State of New York, accepting entry fees, wagers or bets from New York consumers in regards to any competition, game or contest run on” their websites.

Initial victory

"We are pleased with the decision, consistent with our view that DraftKings and FanDuel are operating illegal gambling operations in clear violation of New York law,” Schneiderman said in the aftermath of Mendez's decision. I have said from the beginning that my job is to enforce the law, and that is what happened today."

But the celebration might have been premature. FanDuel's legal team raced to an appeals court, which suspended Schneiderman's victory, at least for the time being.

“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,” FanDuel said in a statement Friday. Based on the appellate court’s ruling, New Yorkers can continue to enjoy FanDuel contests while the legal process moves forward.”

New Yorkers back in the game, sort of

And be assured, this matter will be throughly hashed out in court. In the meantime, players who have money deposited in FanDuel can continue to play games. However, the company said it is not accepting new deposits of funds until a final decision on the legality of the enterprise is reached.

“The Appeals Court decision is not permanent,” FanDuel pointed out. “This decision will be reviewed by a panel of judges early next month.”

Nevada has also officially determined that both FanDuel and DraftKings are running unlicensed gambling operations, but Nevada has far fewer players than New York. The loss of revenue from the Empire State would hurt both companies, should Schneiderman's ban ultimately prevail.

Mid November action

Schneiderman went to court against both DraftKings and FanDuel in mid November, claiming the two companies constitute illegal gambling under state law.

“Under New York law, a wager constitutes gambling when it depends on either a (1) 'future contingent event not under [the bettor’s] control or influence' or (2) 'contest of chance.' So-called Daily Fantasy Sports (“DFS”) wagers fit squarely in both these definitions,” Schneiderman wrote. “DFS is nothing more than a rebranding of sports betting. It is plainly illegal.”

Schneiderman accused both companies of winking at the law, maintaining in public that they run games of skill, but privately evoking the profits of gambling to investors.

Currently, there's a stand-off between regulators in Nevada and New York and major daily fantasy sports (DFS) enterprises.

The states claim these games are gambling operations that require a license. The companies – primarily FanDuel and DraftKings – insist they provide games of skill.

While both arguments make their way through the courts, a veteran sports book operation has signaled which way it thinks the argument will go. Vic Salerno, who has guided over 100 licensed book operations in Nevada, has applied to Nevada regulators to offer a variety of fantasy sports contests through Nevada casinos.

His new company, US Fantasy (USF), is likely to emerge as a legal alternative to FanDuel and DraftKings, while legal issues in New York are resolved.

Pending approval by Nevada regulators, these games would be offered as an intra-state skill game utilizing pari-mutuel systems. USF says its format is specifically designed for regulatory oversight.

“Practical solution”

“US Fantasy immediately provides a practical solution to the current issues surrounding DFS,” the company said in a release.

DFS has, to date, hit roadblocks in just two states. But USF claims California, Florida, Massachusetts, Pennsylvania, and others are now actively seeking a regulated consumer protected fantasy sports solution.

USF says its games can be played through traditional terminals at brick and mortar facilities, or with mobile devices and online. It says it has designed-in consumer protections, with age verification, money laundering controls, and segregated player cash accounts.

Where possible, the company said it hopes to co-mingle contest pools among the states to create mega-contests.

"Our unique contests figure to dramatically grow the popularity of fantasy sports in Nevada,” Salerno said. “We strongly anticipate increased customer traffic and revenue for the host casino properties and a taxable benefit for the State."

Left unsaid is Salerno's belief that his licensed operation could be poised to become the new face of daily fantasy sports in the U.S.

If it looks like a duck and walks like a duck...

And as to the question of whether daily fantasy sports will be found to be gambling, Rutgers University gambling expert Lia Nower, director of the Center for Gambling Studies, says the answer is fairly obvious.

“I doubt most people could tell the differences between DFS and sports betting,” Nower said. “Most people, except those who run Major League Baseball, that is.”

In fact, Major League Baseball, the National Hockey League, and Major League Soccer are all major investors in DraftKings. Last year, the National Basketball Association signed a four-year agreement with FanDuel that included an equity stake.

“Isn’t it ironic, they ban Pete Rose for life from baseball and take away his chances at the Hall of Fame for gambling, but MLB can invest millions in, essentially, the same activity and hope for a profit,” said Nower.

But FanDuel and DraftKings will be far from losers if DFS is declared to be gambling. If sports betting becomes legal, Nower says they’re positioned to make billions.

Despite New York Attorney General Eric Schneiderman's declaration this week that daily fantasy sports (DFS) is illegal gambling, millions of consumers will field their fantasy NFL teams this weekend.

The battle over DFS and whether it is a game of skill or chance will likely go on for some time. In the meantime, millions – maybe billions – of dollars will change hands.

Money may, in fact, be the root of the controversy.

The two major DFS enterprises, DraftKings and FanDuel, bring in an enormous amount of money from players, and they spread it around. The two companies have inked deals with professional sports leagues and this year they became the largest advertisers on network television, eclipsing even brewers.

Too many ads?

After Schneiderman's broadside this week, ADWEEK speculated that DFS enterprises may have made themselves a target by spending too much on advertising.

“DFS companies have been launching ads at sports fans from every direction,” ADWEEK reported. “Basically, every major American sports venue is covered in signage. Segments are sponsored on ESPN, the NFL's RedZone Channel, and anywhere else sports is discussed on TV. There are also podcasts, radio shows and digital banners promising 'real money' for winners. DraftKings even plasters the PATH train that connects New Jersey and New York."

But is it a case of states seeing all that money and cynically reaching for their cut, or has the extremely high profile DFS has achieved awakened regulators who are suddenly asking, “Hey, why isn't this considered gambling?”

Simple question

What happens next will likely depend on whether DFS' current exemption under gambling laws as “games of skill” holds up. Recently interviewed by CNBC on the subject, Hall of Fame quarterback Joe Namath wasn't buying the "game of skill" argument.

“Do they have to pay something to play?” Namath asked. “And do they win something? It's gambling.”

Let's take Namath's questions and apply it to professional golf. A pro golfer pays a small fee to enter a tournament, in hopes of winning a large cash prize.

But no one thinks that's gambling because the pro golfer is counting on his skill to put him in the money. So the question should be asked – are people who play DFS in the same league, in terms of skill, as professional golfers?

How about poker players? Winning at poker inarguably requires a large amount of skill, yet it is classified as gambling. More than likely, these questions will be decided in court.

Congressional interest

Meanwhile, Congress is about to get involved. Rep. Frank Pallone (D-NJ) says the Energy and Commerce Committee will hold hearings, especially since the Federal Trade Commission (FTC) has said it has the authority to investigate the industry. And Pallone says he thinks any probe should go beyond DraftKings and FanDuel.

“The legal ambiguity surrounding the industry and its relationship with professional sports makes this issue ripe for Congressional review,” Pallone said. “As we prepare for a hearing, it will be important to hear from the FTC about what it would need to enact regulations on the industry.”

Pallone suggests any regulations also cover the conduct of the major professional sports leagues and their personnel, many of whom, he says, have financial interests in DFS.

Pallone and Sen. Robert Menendez (D-NJ) held a news conference last month outside MetLife Stadium to call attention to what they called “the hypocrisy of the professional sports leagues” in opposing sports betting while supporting daily fantasy sports.

Just like Nevada, the state of New York has found daily fantasy sports (DFS) to be illegal gambling and ordered a halt within the state.

But unlike Nevada, with its much smaller population of players, New York makes up a significant source of players, pumping money into major DFS enterprises like FanDuel and Draft Kings.

In letters to the two companies, obtained by ESPN, New York Attorney General Eric Schneiderman said his office's review of DraftKings' and FanDuels' games found them to constitute illegal gambling.

Disappointed

“We are very disappointed that New York Attorney General Eric Schneiderman took such hasty action today, particularly since he did not take any time to understand our business or why daily fantasy sports are clearly a game of skill,” DraftKings said in a statement. “We strongly disagree with the reasoning in his opinion and will examine and vigorously pursue all legal options available to ensure our over half a million customers in New York State can continue to play the fantasy sports games they love.”

DFS was determined to be a “game of skill” under a 2006 law regulating gambling, shielding it from regulation under the law. But Schneiderman says the facts suggest otherwise – people wager things of value on outcomes they cannot control. That, he says, is gambling.

A month ago, the Nevada gaming commission reached the same conclusion. In a memorandum, Nevada Gaming Control Board Chairman A.G. Burnett said he asked the state attorney general's office and others to examine enterprises like DraftKings and FanDuel to determine if they were gambling operations.

“Based on these analyses, I, along with staff, have concluded that DFS constitutes gambling under Nevada law,” Burnett wrote. “More specifically, DFS meets the definition of a game, or gambling game pursuant to Chapter 463 of the Nevada Revised Statutes.”

Compromise?

In it's reaction to Scneiderman's latest action, DraftKings said other regulators, including the Federal Trade Commission (FTC), have taken what it calls “a reasoned, informed and measured approach to the daily fantasy sports business.”

“We hope this trend continues along with due consideration for over 56 million sports fans across the country who enjoy playing fantasy sports,” the statement said. “We remain committed to working with all relevant authorities to ensure that our industry operates in a manner that is transparent and fair for all consumers.”

That seems to suggest the way may be open to reclassify DFS so that governments can regulate it, and perhaps get a piece of the action. With its association with major media and sports leagues, DFS generates billions of dollars -- enough for everyone, it would seem.