GPWA Times Magazine - Issue 34 - February 2016

DFS industry under attack in many U.S. states by Gary Trask To call 2015 a tumultuous year for the daily fantasy sports industry would be a vast understatement. The first few months brought an array of sponsorships with entities such as the NFL, the World Series of Poker and NASCAR. DraftKings and FanDuel raised millions of dollars, and media giants like Yahoo and CBS Sportsline jumped into the DFS fray. DraftKings applied for and received a U.K. gam- ing license and planned a Q4 launch. Momentum was building and the in- dustry was predicting mind-boggling user numbers and entry fees. But by late summer, scrutiny of the industry was on the rise — and when $107 million worth of ads relentlessly popped up on TV screens in September as the NFL season kicked off, questions about regulation and the legality of DFS got louder and louder. In turn, DraftKings delayed its entry into the U.K., and three U.S. states took drastic action. In mid-October, the Nevada Gaming Control Board deliv- ered the news that daily fantasy sports “constitute sports pools and gambling games” and, as a result, said that “pay- to-play daily fantasy sports cannot be offered in Nevada without licensure.” Less than a month later, New York Attorney General Eric Schneiderman ordered DraftKings and FanDuel to “stop accepting bets from New York residents,” saying they “are the lead- ers of a massive, multibillion-dollar scheme intended to evade the law and fleece sports fans across the country.” A cease-and-desist order was filed and then appealed by the two companies. In a hearing held the day before the U.S. celebrated Thanksgiving, Supreme Court Judge Manuel Mendez declined to issue a ruling, but four weeks later he announced that DraftKings and FanDuel are “illegal gambling opera- tions” that “subject the public to fraud- ulent perceptions.” The two companies were granted a temporary emergency stay, meaning they could remain fully operational in one of the biggest and most lucrative DFS markets in the country, but the news had a ripple effect as more and more states stood up and took notice. Two days before Christmas, the ham- mer came down in Illinois when Attorney General Lisa Madigan said DFS constituted illegal gambling un- der the state’s law and explained that it doesn’t matter if it involves “luck or skill” since state law prohibits both. “Absent legislation specifically ex- empting daily fantasy sports contests from the gambling provisions, it is my opinion that daily fantasy sports con- tests constitute illegal gambling under Illinois law,” she wrote. Madigan, a Democrat, sent letters to DraftKings and FanDuel, saying she expected both sites to cease operations in Illinois. In all instances, the DFS giants and their lawyers condemned the rulings and decisions, regularly stating they were “terribly disappointed” and “respectfully disagree” and that they would seek a “judicial resolution of their right to offer daily fantasy sports” to their millions of customers. The turbulent year for the daily fantasy sports ended with another unexpected development when Schneiderman re- surfaced on New Year’s Eve and filed an amended lawsuit, asking FanDuel and DraftKings to refund all players from New York who lost money on the sites, repay all of the money it has generated from the state – an estimated $200 million – and pay a fine of up to $5,000 per case. As the calendar turned to 2016, mil- lions of U.S. residents were still play- ing daily fantasy sports, but the cloud of uncertainty remained a heavy bur- den, both for the customers and the operators. More hearings and dis- cussions in other U.S. states, such as Massachusetts, California, New Jersey and Florida, have been scheduled. Where will this all lead? Nobody knows for sure, but the one sure bet is that there are more heated delibera- tions and vitriol ahead, with additional court orders, hearings and appearanc- es. The DFS debate is far from over, and the first half of 2016 will be crucial to its future in the U.S. and beyond. Webmaster News & Quotables: Daily Fantasy Sports Update 7