Vimbai Chikomo Jan. 21, 2016, 1:45pm


NEW YORK (Legal Newsline) -- A New York appellate court has ruled that DraftKings and FanDuel can continue to operate in New York until there is a decision on their appeal of a court’s order banning the two companies form operating in the state.

The New York Supreme Court Appellate Division’s Jan.11 ruling is the latest development in the legal battle between the top two daily fantasy sports companies in the country and New York Attorney General Eric Schneiderman.

Schneiderman issued cease-and-desist letters in November.

“The appellate court granted a stay pending appeal, which means that DraftKings can continue to operate while the appeal is pending,” said Randy Mastro, an attorney representing DraftKings.

Mastro said that the appeal will not be heard in court until at least May, and the decision will come sometime after.

This comes as good news to many daily fantasy sports fans in New York, some of whom protested outside Schneiderman’s office in response to the November ban.

The appellate decision came more than a week after Schneiderman filed an amended lawsuit on New Year’s Eve against DraftKings and FanDuel, asking the court to order both companies to return all the money they earned from New York customers who paid $200 million in fantasy game entrance fees to the companies.

Back in November, Schneiderman issued letters ordering both companies to stop accepting wagers in New York immediately after an investigation by his office revealed that DraftKings and FanDuel were allegedly in violation of the state’s antigambling laws. The injunction was granted by New York Supreme Court Justice Manuel Mendez.

Schneiderman's Nov. 11 press release stated, “Our investigation has found that, unlike traditional fantasy sports, daily fantasy sports companies are engaged in illegal gambling under New York law, causing the same kinds of social and economic harms as other forms of illegal gambling, and misleading New York consumers."

Schneiderman went on to add that “daily fantasy sports is neither victimless nor harmless, and it is clear that DraftKings and FanDuel are the leaders of a massive, multi-billion-dollar scheme intended to evade the law and fleece sports fans across the country.”

Schneiderman’s office also said that its investigation found that both companies allegedly practice deceptive advertising to entice customers into online gambling, and “deliberately target demographics susceptible to problem gambling.”

Following the court order, both companies filed appeals separately, with DraftKings stating in court documents that the “irreparable harm that would result from the Attorney General’s threatened shutdown is self-evident, and this Court’s immediate intervention is necessary to prevent it.”

Daily fantasy sports games offer players the opportunity to compete for prizes by assembling virtual teams of athletes, and then relying on those athletes’ statistics to determine winners. The contests are conducted over a day, or a week – instead of an entire season like traditional fantasy sports games.

The companies contend that their games do not constitute gambling because they are based on skill, not chance.

Officials in Nevada and Illinois are also challenging DraftKings’ and FanDuel’s business operations in their respective states. In October, Nevada regulators ordered both companies to shut down business in the state.

“Nevada’s issue is one of licensing,” Mastro said. “Nevada recognizes a broad variety of games as within its licensing power, but it permits a broad variety of games so long as you have a license.”

Illinois Attorney General Lisa Madigan also opined in December that daily fantasy sports violate state laws against gambling.

“The Illinois Attorney General recognized that this is an issue that should be decided by the courts on an expedited basis. So we’ve reached an agreement on an expedited schedule for resolving the case that takes us into June of this year,” Mastro said. “And in the interim, DraftKings continues to operate in Illinois.”

On Jan. 19, Texas Attorney General Ken Paxton issued an opinion stating both sites violate Texas’ antigambling laws because “the house takes a cut.”

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