FanDuel and DraftKings appear to have sorted out their legal issues with New York State Attorney General Eric Schneiderman after the two Daily Fantasy Sports (DFS) providers agreed to settle earlier this week. According to the terms of the settlement, both DFS sites will stop paid contests in New York in exchange for the withdrawal of all legal disputes that charge them from operating illegally in New York.
Speaking on the agreement, Eric Schneiderman said that his job was to enforce the gambling law in New York and this agreement will finally ensure that DFS sites will abide by the state’s law.
One of the most vocal critics of the DFS industry, Schneiderman had filed legal suits against both the companies in 2015 saying that their operations were illegal as DFS games were similar to casino games and constituted to gambling under the state’s gambling law. Earlier this year, he filed an additional suit seeking the return of fees paid by New York residents and fines to the tune of $3 billion. Both companies have said that their contests are game of skill and not of chance and were not willing to file for gambling licenses to operate in New York.
But it seems like the possibility of a lengthy and expensive legal battle has made both companies reconsider their position. In a statement, FanDuel said,
New York is a critical state for FanDuel. While it is disheartening for us to restrict access to paid contests in our home state, we believe this is in the best interest of our company
New York is an important market for the DFS industry. According to Eilers & Krejcik Gaming LLC, a research company in California, the results of a poll conducted in 2015 among DFS players revealed that New York was the biggest market in the country for DFS operators constituting 13 percent of the total market segment. The next largest state was California with 10 percent.
Eilers & Krejcik has said that if the DFS sites lose New York as a market it could result in a loss in revenue of almost $35 million a year. Now that FanDuel and DraftKings have agreed to stop offering paid DFS games, it looks like they will no longer be able to profit from DFS games in New York.
The situation will change only when legislation is passed in the state to legalize paid DFS contests. State Senator John Bonacic who presides over the Racing, Gaming and Wagering committee in the state has proposed a bill to regulate interactive fantasy sports. He has stated that it one of his priorities of this year.
With this settlement, New York becomes the ninth state where DraftKings will not accept paid entries and the tenth for FanDuel.
