The attorney general for New York, Eric T. Schneiderman, dealt a huge blow to the daily fantasy sports (DFS) industry by finding it to be “illegal gambling.” He sent cease-and-desist letters Tuesday to the two biggest DFS companies, DraftKings and FanDuel, demanding that they stop taking bets in his state.

“Our review concludes that DraftKings’/FanDuel’s operations constitute illegal gambling under New York law,” Schneiderman wrote in the letters, according to ESPN. In October, Nevada authorities determined that DFS constituted gambling, and as such they ordered the two companies to stop operating there without licenses.


In response, a DraftKings spokesperson said:

“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.  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.
“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.  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.”

DFS sites allow people to bet varying amounts of money that teams they build using real players can outdo other bettors’ teams, employing point systems based on those players’ on-field accomplishments. The sites have long pointed to a 2006 law that banned online forms of gambling such as poker, but carved out a niche for fantasy sports, on the basis that there was skill involved.

“Fantasy sports is a game of skill and legal under New York State law,” FanDuel said in a statement. “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.”
“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 said, in a statement (via ESPN). “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 growth of DFS, which essentially did not exist when the 2006 law was drafted, has mushroomed in recent years, attracting the attention of federal and state regulators. DraftKings and FanDuel have spent many millions on advertising that seems ubiquitous at times during sporting events, and they have partnered with a number of sports leagues and teams, including the Giants, Jets, Rangers, Knicks and Nets.