Judge upholds New York’s Ban on DraftKings, FanDuel

Earlier this month, New York State Attorney General Eric T. Schneiderman declared daily fantasy sports (DFS) as illegal gambling and sent cease-and-desist letters to DraftKings and FanDuel. Both of these DFS-industry leaders were hoping to block the attorney general’s actions through a restraining order. However, they’ve proven unsuccessful because Justice Manuel Mendez has decided to let the matter stand.

DraftKings and FanDuel argue that they face irreparable damage if they’re locked out of New York until having a chance to present their case. DraftKings claims that 475,000 of its 2.5 million users hail from the Empire State, while FanDuel asserts that “hundreds of thousands” of its 1 million users come from New York.

In FanDuel’s case, they have had trouble processing payments to players because Schneiderman’s office has already contacted banks and payment processors, asking them to stop serving DraftKings’ and FanDuel’s New York customers.

Schneiderman’s lawyers informed Mendez at a hearing that he couldn’t issue an order to stop their actions because they haven’t officially done anything to stop these sites from doing business in New York.

“They have not taken action yet to somehow enjoin the plaintiff from continuing to engage in their business here in New York,” Mendez said in court. The judge then ordered both parties back to court on Nov. 25.

Based on Mendez’s comments, it appears that, by law, it’s not technically illegal for DraftKings and FanDuel to continue operating in New York. And despite Schneiderman’s cease-and-desist letters, DraftKings has said that they’re “confident in our legal position” and will continue to serve New Yorkers.

This case draws some parallels to the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006, which was attached to the Safe Port Act that George W. Bush signed into effect. In this case, the U.S. made it illegal for banks to accept transactions related to illegal online gambling. In 2011, poker sites like Full Tilt and PokerStars were busted for circumventing the UIGEA by disguising transactions.

In the New York situation, Schneiderman hasn’t officially gotten any legislation through that would prevent FanDuel and DraftKings from legally operating in the Empire State. However, based on FanDuel’s recent processing struggles, it appears that Schneiderman’s request has convinced some companies to stop working with these DFS sites in New York.