New York Court Hears Arguments On Daily Fantasy Sports Websites

DraftKings employees works at their desks at the company's Boston offices.  (Stephan Savoia/AP/File)
DraftKings employees works at their desks at the company's Boston offices. (Stephan Savoia/AP/File)

A judge said Wednesday he would not take long to rule on a motion by New York's top law enforcement official to stop the country's two biggest daily fantasy sports companies from operating following two hours of arguments in a packed Manhattan courtroom.

Justice Manuel Mendez, of state Supreme Court, told lawyers for FanDuel, DraftKings and an assistant attorney general that his decision would "come very soon."

Earlier this month, Attorney General Eric Schneiderman sent both companies cease-and-desist letters after declaring their businesses illegal gambling operations that should be shut down. The companies have countered that their contests are skill-based, have been around for years and have attracted investments from media companies, sports teams and other others who have deemed them legal.

The games - in which customers pay to put together rosters of real-life professional athletes in order to compete against others in online leagues - have come under heavy scrutiny this year after both companies spent millions of dollars on advertisements pitching the games to casual sports fans ahead of the 2015 NFL season.

After a DraftKings employee beat more than 200,000 other fantasy football players on rival FanDuel in October, winning $350,000 and raising questions about insider trading, Schneiderman announced he was investigating and asked the companies to turn over the results of their internal probes.

On Wednesday, Kathleen McGee, an assistant attorney general, told Mendez the case against the companies was simple. She said that while putting together a competitive roster may require skill, ultimately the contests involve betting on how actual professional players preform in real life, in the future, subject to factors outside their control such as rain delays, blown calls and injuries.

"If chance is a material element of these games it doesn't matter how much `skill' is involved," she said.

John Kiernan, a lawyer for New York-based FanDuel, argued that his company's contests are immensely skill-based - and were indeed events outside and separate from what happens on the field. He likened daily fantasy sports players to general managers picking rosters of individual players, thus by skill increasing the possibility of success independent of whether a professional team wins or loses on the field.

Prompted by a question by the judge, he said the central argument in the case is whether FanDuel's customers are "mere observers or actual participants of a contest that is separate and apart."

David Boies, an attorney for Boston-based DraftKings, argued that since season-long fantasy sports are permissible under state law, so too must daily fantasy sports.

"In fantasy you are betting on what happens in the fantasy world," he said. "You're competing not against the house, but you're competing against other fantasy players."

Since Schneiderman's letter, FanDuel has stopped New Yorkers from playing on its site and both companies have complained that payment processors have been pressured to not facilitate hundreds of thousands of New York customers' payments.

The companies have also said they're open to regulations and consumer protections, but argue legislatures should head that effort, not the courts.



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