DraftKings, FanDuel vow to stay in NY despite AG's cease and desist order

Hours after New York State Attorney General Eric Schneiderman ordered DraftKings and FanDuel to stop allowing Empire State residents to make daily fantasy sports (DFS) wagers on their sites, the two top DFS operators made it clear they would not abide by the cease and desist order.

"We are very disappointed that New York Attorney General Eric Schneiderman took such hasty action today, particularly since he did not take any time to understand our business or why daily fantasy sports are clearly a game of skill," said DraftKings in a statement. "We strongly disagree with the reasoning in his opinion and will examine and vigorously pursue all legal options available to ensure our over half a million customers in New York State can continue to play the fantasy sports games they love."

FanDuel's statement had a similar tone, if perhaps more confrontational: "Fantasy sports is a game of skill and legal under New York State law. This is a politician telling hundreds of thousands of New Yorkers they are not allowed to play a game they love and share with friends, family, coworkers and players across the country. The game has been played — legally — in New York for years and years, but after the Attorney General realized he could now get himself some press coverage, he decided a game that has been around for a long, long time is suddenly now not legal. We have operated openly and lawfully in New York for several years. The only thing that changed today is the Attorney General's mind."

The sites, however, may not have much choice in the matter. Legal Sports Report is reporting that a major payment processor has ordered the sites to comply with the attorney general's order*.

In a statement, Schneiderman states that daily fantasy sports constitute illegal gambling in New York, and therefore the companies must cease offering their services within the state.

"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," reads the statement. "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. Today we have sent a clear message: not in New York and not on my watch."

The news comes less than a month after the Nevada Gaming Control Board issued an order stating that daily fantasy sports operators would need to apply for a gaming license in order to legally operate in the state. While both sites have now barred people from within Nevada's borders from participating in their contests, the small population of the Silver State made the impact of the loss of players rather trivial. The loss of New York residents, however, would have a much larger impact on the sites, as the population is roughly seven times larger, and ESPN's David Purdhum and Darren Rovell reports that, according to Eilers Research, New York has the highest number of DFS players in any state in the U.S.

While the news from New York was not good, developments in Florida were more positive for the DFS industry on Tuesday. State Senator Joe Negron and Rep. Matt Gaetz plan to introduce daily fantasy sports legislation that would regulate the industry, and similar legislation was recently introduced in Florida, as well.

"We continue to see a number of other officials, including Senator Negron in Florida, Representative Zalewski in Illinois and the Federal Trade Commission, take a reasoned, informed and measured approach to the daily fantasy sports business," said DraftKings in a statement. "We hope this trend continues along with due consideration for over 56 million sports fans across the country who enjoy playing fantasy sports. We remain committed to working with all relevant authorities to ensure that our industry operates in a manner that is transparent and fair for all consumers.

"New York's actions today are an unfortunate example of a state government stifling innovation, technology and entrepreneurship and acting without full and fair consideration of the interests of consumers."

* Updated on 11/11/2015 to include information about payment processor.