Ordered to stop, fantasy sports companies turn to NY court

The country's two biggest daily fantasy sports companies filed court papers on Friday in New York, asking a judge to stop the state attorney general's efforts to shut down their operations and rule on the legality of their businesses.

In separate complaints filed in state Supreme Court in Manhattan, FanDuel and DraftKings similarly ask a judge for an injunction, arguing that Attorney General Eric Schneiderman wrongly characterized their businesses as games of chance, rather than skill, in cease-and-desist letters earlier this week.

Schneiderman had given the companies five days to convince his office to not pursue legal action after sending the letters, which likened the games to the lottery and said they were in violation of state gambling laws. The companies called the letters ill-conceived and vowed to fight Schneiderman's efforts.

Boston-based DraftKings said in its filing that Schneiderman's efforts to shut down their New York operations represented "a shocking overreach," including pressuring payment processors to cut ties.

"He has unleashed an irresponsible, irrational, and illegal campaign to destroy a legitimate industry, intending to deprive hundreds of thousands of New Yorkers of the use and enjoyment of these services," according to the lawsuit filed by Randy M. Mastro, an ex-New York City deputy mayor under Rudolph Giuliani.

New York-based FanDuel said urgent judicial review was necessary since its business operations were already being hurt by Schneiderman's actions.

In a statement, the attorney general's spokesman said the law was clear.

"DraftKings and FanDuel are operating illegal sports betting websites under New York law, causing the same kinds of social and economic harms as other forms of illegal gambling," said Damien LaVera.

The court filings by FanDuel and DraftKings say the games are more skill-based than even season-long fantasy sports, which are permissible under state law.

They say the contests they offer, in which players pay a fee to enter and compete against other players, involve immense skill since rosters can only be picked based on a host of factors that include a salary cap to prevent people from stacking all the talent. The fact that a few winners account for most the winnings is an indication of the skill involved, not of luck.

Daily fantasy has exploded in popularity this year after both websites unleashed a flurry of on-air, online and billboard ads promoting the games to casual sports fans.

A DraftKings employee winning $350,000 in a contest on rival FanDuel earlier this year -- beating more than 200,000 other players -- raised questions about insider trading. Schneiderman's office responded by asking the companies for information based on their own internal probes.

While both companies have since barred their employees from playing on rival websites, they say no evidence of insider trading has emerged from the case.

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