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DraftKings and FanDuel Banned in New York

New York’s attorney general has ordered DraftKings and FanDuel to stop taking entries in his state, ruling that they constitute illegal gambling.

NYT (“Attorney General Tells DraftKings and FanDuel to Stop Taking Entries in New York“):

The New York State attorney general on Tuesday ordered the two biggest daily fantasy sports companies, DraftKings and FanDuel, to stop accepting bets from New York residents, saying their games constituted illegal gambling under state law.

The cease-and-desist order by the attorney general, Eric T. Schneiderman, is a major blow to a multibillion-dollar industry that introduced sports betting to legions of young sports fans and has formed partnerships with many of the nation’s professional sports teams.

Given the New York attorney general’s historic role as a consumer-protection advocate, legal experts said the action was likely to reverberate in other states where legislators and investigators are increasingly questioning whether the industry should operate unfettered by regulations that govern legalized gambling.

“It is clear that DraftKings and FanDuel are the leaders of a massive, multibillion-dollar scheme intended to evade the law and fleece sports fans across the country,” Mr. Schneiderman said, adding, “Today we have sent a clear message: not in New York, and not on my watch.”

Fantasy sports companies contend that their games are not gambling because they involve more skill than luck and were legally sanctioned by a 2006 federal law that exempted fantasy sports from a prohibition against processing online financial wagering. That view is being challenged as fantasy sites have begun offering million-dollar prizes and bets on individual sports, such as golf, mixed martial arts and Nascar races, magnifying the element of chance and making the exemption more difficult to defend.

I’m surprised it’s taken this long for authorities to put a stop to the practice. The advertisements for the games, widespread on football telecasts, make it clear that they’re being touted as get-rich-quick schemes.

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About James Joyner
James Joyner is the publisher of Outside the Beltway, an associate professor of security studies at the Marine Corps Command and Staff College, and a nonresident senior fellow at the Atlantic Council. He's a former Army officer and Desert Storm vet. He earned a PhD in political science from The University of Alabama. Views expressed here are his own. Follow James on Twitter.

Comments

  1. The open question, of course, is why what these companies do should be illegal.

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  2. SKI says:

    Normally politicians do things that make them popular. I’m thinking the blowback is going to be more than the AG expected.

    And I don’t think it is gong to stop DFS. We will see legislation specifically allowing it (with regulation) if the AG doesn’t back down.

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  3. James Joyner says:

    @Doug Mataconis: Yeah, I’ve got mixed feelings. People ought to be free to make their own choices but this is essentially a scam perpetrated on the stupid.

    @SKI: I’m okay with that, actually. The AG’s job is both to enforce the law and act as a consumer advocate. He’s doing his job here.

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  4. J Bigness says:

    New York is getting as corrupt as it could ever possibly be. They allow state sponsored gambling, aka the lottery system, and even betting on horses (there are hundreds of OTB off track betting businesses). The fantasy sports leagues require a considerable more skill than NY’s own allowed gambling venues, and yet they cry fowl over this? And, we haven’t even gotten to the various bingo games all over the state.

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  5. SKI says:

    @James Joyner: But is he actually enforcing the law?

    It is indisputable that Fantasy Sports is a skill-based game. There is a reason that some players win regularly and others don’t.

    More importantly, there is specific legislation from Congress, the Unlawful Internet Gambling Enforcement Act of 2006, that carves out an exemption for fantasy sports that meet certain criteria. DFS games make sure they meet those criteria.

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  6. @James Joyner:

    And the other question is, if something like Fan Duel is legal, then why shouldn’t sports betting be in states other than Nevada? New Jersey has been trying to legalize sports betting for several years now, but there’s a Federal law that essentially prohibits it in any state other than Nevada. There’s really no rational reason for that other than the fact that Harry Reid is a powerful Senator and the Vegas gambling interests donate a lot of money to politicians from other states.

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  7. Moosebreath says:

    @James Joyner:

    “People ought to be free to make their own choices but this is essentially a scam perpetrated on the stupid.”

    New York wants no one other than them to perpetrate scams on the stupid people of their state. The lottery (described by Ben Franklin as “Nature’s tax on fools”) is OK, but this is not.

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  8. SKI says:

    @James Joyner:

    People ought to be free to make their own choices but this is essentially a scam perpetrated on the stupid.

    Have you ever actually played any fantasy sports?

    Yes, anyone who thinks they are going to win millions with a single entry are idiots but the overwhelming bulk of the 30+ Million who play fantasy sports, daily or season-long, are neither idiots nor being scammed. Particularly those playing H2H or 50/50s, not the GPP tournaments.

    The fee to the sites for hosting/guaranteeing payouts for GPPs*, etc. typically ranges from 9-10%, less for higher staked games, more for lower staked ones. (*There is some real leverage to be made for under-subscribed GPPs on the smaller sites. The sites need 90% of the “seats” filled to make money on their rake – hence the bombardment of advertising.)

    There are generally three types of players: casual folks looking for a little “action” for fun, seasoned fantasy players who are using their knowledge as a supplement for their season-long leagues and sharks who play a ton of DFS, frequently using algorithms and computer modeling to construct huge numbers of lineups. None are idiots. Just because you don’t understand something doesn’t mean that the people who do are idiots.

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  9. Hal_10000 says:

    I dunno. On the one hand, I really hate Draft Kings and FanDuel, which have taken something harmless and fun (low stakes fantasy football) and turned into something ugly.

    On the other hand, I have to laugh when we are lectured on gambling ethics by states that run lotteries that are way more predatory than anything Fan Duels could dream of. They target the poor, they don’t use the money to pay for the things they say they are (just to shuffle tax revenues around to other things) and they pay out odds that would make Draft King’s user revolt.

    “Draft Kings is evil! Be sure to buy your Powerball tickets!” Ugh.

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  10. KM says:

    @SKI:

    More importantly, there is specific legislation from Congress, the Unlawful Internet Gambling Enforcement Act of 2006, that carves out an exemption for fantasy sports that meet certain criteria. DFS games make sure they meet those criteria.

    Ok serious question: why does that exemption even exist? Why has betting on pretend teams somehow been deemed acceptable when they are real players playing real games? Can anyone explain the logic to me?

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  11. @SKI:

    I can’t speak for James but I’ve been doing Fantasy Football for a couple years now It’s a league basically among friends — from the online and real world — basically and there’s no money on the line. It’s fun, and it’s actually increased my interest in the NFL to the extent I’m following games I might not have otherwise followed. I’ve actually been doing pretty well at it too, surprisingly. I’m not sure why I’d want to put money on the line doing it, though,

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  12. Hal_10000 says:

    @Doug Mataconis:

    The reason people put money on it, mostly, is to keep the league competitive and to keep people from screwing around. You don’t need to put much on it. The most expensive league I’ve been in was $5 a head. But even that small amount will guarantee that everyone tries their best, which makes the league more fun.

    But I don’t understand why people would put LOTS of money on it. That just seems crazy. Then again, I don’t understand why people go to Vegas and gamble tons of money, either. I never felt the urge to play around with more than the nickel slot machines.

    Oh, well. A fool and his money are soon partied.

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  13. SKI says:

    @Doug Mataconis: I’ve been playing fantasy baseball and football since the late 1990s. Almost all my leagues have always had league fees to both pay the site-hosting fees (we pre-dated the free league hosting now available from ESPN and Yahoo and now have more complicated league rules than they typically allow) and to create a pot of cash for the playoff teams/champ. Most are in the $100-$150 range per season – and that isn’t big money for fantasy.

    My primary league in each sport is a heavy-keeper where we keep at least half the players year to year, draft rookies/minor leaguers in a separate draft and my football league also uses individual defensive players. There is a ton of skill in fantasy – there is a reason the same guys finish “in the money” each year/week.

    I do play in one more casual “friends and family” league that has no league fee and let me assure you the level of skill, attention and the basic amount of challenge is much lower – and that does impact the enjoyment.

    If you were better, and more into it, you would want the challenge of putting up your cash and taking your shot.

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  14. Just 'nutha ig'rant cracker says:

    @Doug Mataconis: Umm… Because “get rich schemes” should be limited to MLMs and stock pyramid swindles? We don’t want gambling horning in on white collar crime? Otherwise, I got nuthin’.

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  15. Just 'nutha ig'rant cracker says:

    @Hal_10000: Your comment reminds me of a poster that I used to see in the Kingdome in Seattle. I was a warning from the Liquor Control Board warning of the penalties for DUI–with a handy chart to assist you in determining, based on your body mass by weight, how many minuted before the end of the game you should buy your last 32 oz. Kingbeer.

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  16. C. Clavin says:

    @Doug Mataconis:

    The open question, of course, is why what these companies do should be illegal.

    Because it cuts into Adelson’s profits. Just ask Adelson’s butt-boy, Jason Chaffetz. When Congress picks winners and losers, Adelson is always a winner.

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  17. Davebo says:

    @SKI:

    There are generally three types of players: casual folks looking for a little “action” for fun, seasoned fantasy players who are using their knowledge as a supplement for their season-long leagues and sharks who play a ton of DFS, frequently using algorithms and computer modeling to construct huge numbers of lineups.

    You left out employees of Fanduel and DF that have inside information into the selections users are making.

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  18. SKI says:

    @Davebo: He set his lineup before the information was released.

    Further, even if he had the info, the value is useless for any single lineup. The value in knowing ownership percentages is to allow a true shark with sophisticated computer modeling to differentiate their lineups to use under-owned players across a ton of lineups to increase the uniqueness of the lineups and improve the chances of winning it all IF the under-owned players actually hit (because less people will be on them). It does NOT tell anyone how the players will perform or what the actual best lineup is in advance.

    It was good that DK & FD put policies in place to prohibit their employees from playing on their competitors sites (they already banned them from playing on their own) but having that information after the lineup was submitted, or even before, doesn’t, by itself, provide guidance on what players to select or help project their points for that week. It helps, at the margins, choose between lineups where you project the points to be the same (play the more unique one).

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