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DraftKings, FanDuel lose DFS legal battle in New York

DraftKings FanDuel

Daily fantasy sports (DFS) operators DraftKings, FanDuel have been dealt a significant blow after a New York court ruled that neither company can conduct business in the state for the foreseeable future.

New York Supreme Justice Manuel Mendez granted state Attorney General Eric Schneiderman’s request for an injunction that will block both companies from operating in New York, while also denying temporary retaining orders from the DFS brands.

Both operators, which have been given 30 days to leave New York, are able to file emergency appeals against the order, with DraftKings’ lawyer stating that the firm intends to do so.

The ruling specifically highlighted New York Penal Law section 225.00[1], which defines ‘Contest of Chance’ to mean “any contest, game, gaming scheme, or gaming device in which the outcome depends in a material degree upon an element of chance, notwithstanding that skill of the contestants may also be a factor therein”.

Mendez added: “The language of Penal Law 225.00 is broadly worded and, as currently written, sufficient for finding that DFS involves illegal gambling.”

Other key points from the ruling include a reference to the Unlawful Internet Gambling Enforcement Act (UIGEA), which DraftKings, FanDuel used to defend their operations in the state.

However, Mendez said that the “UIGEA language exempting fantasy sports has no corresponding authority under New York State law as currently written” and the exception found in UIGEA “does not apply under the current New York statutory language”.

Mendez also dismissed an argument from the operators that the state’s Attorney General had failed to act over DraftKings, FanDuel earlier, with both brands having been active in the state for a number of years already.

In his ruling, Mendez said: “The possibility of estoppel against a governmental agency is to be denied, in all but the, “rarest of cases”…the DFS corporations, have not stated a basis to find the ‘rarest of cases’ exception applies to the NYAG’s claims, and the potential for public fraud.”

Mendez also highlighted that in order for a preliminary injunction to be granted, a likelihood of success warranting the injunction should be found, ruling that the Attorney General was most likely to prevail here.

He added: “The balancing of the equities are in favour of the NYAG and the State of New York due to their interest in protecting the public, particularly those with gambling addictions.”
Both operators are likely to appeal the decision, which has no direct impact on the legal status of DraftKings, FanDuel in other states across the US.

It is not yet known how the decision will impact active bills in the legislature that deal with DFS in New York, with assemblyman Dean Murray having put forward a bill just this week in an effort to alter state law over DFS.

David Boies, counsel to DraftKings and Chairman of Boies, Schiller & Flexner, said: “We are disappointed with the Court’s decision, and will immediately file an emergency notice of appeal in order to preserve the status quo.

“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.”

 

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December 11, 2015: posted in News And Reviews No Comments

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