Daily Fantasy Gets Sacked in New York – Is Your State Next?

With a judge's decision on Friday, DraftKings and FanDuel get shut down in NY – and at least 8 other states could soon follow suit

Daily fantasy sites were shut down in New York on Friday. Credit: Zia Morales/Bloomberg/Getty

UPDATE: On Friday afternoon, an appellate court in New York granted DraftKings and FanDuel an emergency temporary stay – allowing the sites to continue accepting entries from players in the state. The stay will reportedly remain in place until the end of the calendar year.

It's game over. For now, at least.

On Friday, New York Supreme Court Justice Manuel Mendez ruled daily fantasy sports sites like DraftKings and FanDuel are illegal under state law, and must fold up their tents in New York.

The New York State decision could signal the end of the billion-dollar daily fantasy industry as we know it.

Judge Mendez backed up Attorney General Eric Schneiderman's assertion that daily fantasy amounts to illegal gambling and should not be allowed to accept wagers or continue to do business in New York State.

"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 a statement. "I have said from the beginning that my job is to enforce the law, and that is what happened today."

Season-long fantasy games are untouched, as the rulings – one each for DraftKings and FanDuel – focused only on daily. The decision means the sites must cease operations in New York immediately, though they were given 30 days to appeal, which both did on Friday.

"We are disappointed with the Court's decision, and will immediately file an emergency notice of appeal in order to preserve the status quo," David Boies, counsel to DraftKings and chairman of Boies, Schiller & Flexner LLP, said in a statement. "Daily Fantasy Sports contests have been played legally by New Yorkers for the past seven years and we believe this status quo should be maintained while the litigation plays out."

"Today’s preliminary decision was wrong and we expect we will ultimately be successful,” FanDuel added in a separate statement.

Schneiderman's case hinged on the idea that daily fantasy is a game of chance, not skill, as the sites claim it is. New York State law considers any game with even a material presence of chance involved to be a form of gambling. While daily fantasy's lawyers argued that the most successful players relied on skill to win, Mendez sided with Schneiderman's argument that daily fantasy is still a game – regardless of any skill that goes into it.

Schneiderman argued that although skill is a factor, once rosters are locked the outcome of games is entirely out of the daily fantasy players' hands. If you are one of those players, you probably agree with that assessment. Because of the low tolerance for chance in games according to New York law, daily fantasy's lawyers were not able to puncture that argument.

So what happens next? Legal experts believe the fantasy fight is far from over. While the court decision blocks daily fantasy sites from operating in New York, it's worth noting that there is legislation working its way through Albany that could eventually open the door for daily fantasy with actual laws permitting play.

The most immediate next step will take place in the courts, though.

"The battleground now shifts to the New York Appellate Division First Department, which will hear the appeal filed by DraftKings and FanDuel as well as the expected emergency request to 'stay' the effect of Justice Mendez's preliminary injunction," says Daniel Wallach, a sports and gaming legal expert and a shareholder at Becker & Poliakoff in Ft. Lauderdale, Florida.

The New York decision also sets a legal precedent for other states and could lead to a wave of daily fantasy shutdowns as lawmakers try to figure out how the industry will be regulated.

"This decision could impact how other states treat daily fantasy, particularly in those states that employ the exact same definition of 'gaming" as New York," Wallach says. "By my count, there are at least eight states which have the same statutory language: Alabama, Alaska, Hawaii, Missouri, New Jersey, Oklahoma, Oregon and Washington. Several of these states could become vulnerable for the industry as a result of the New York decision."

Observers believe this is just the beginning of what is going to be a long battle in the courts that could eventually lead to the legalization and regulation of daily fantasy.

But you never know. So place your bets – er, set your lineups ­– while you can.