The phrase “one step forward, two steps back” comes to mind when discussing daily fantasy sports in the USA. The future of New York DFS games has now been called into question.
Only a week ago, we reported that DFS was officially declared legal in Virginia. This is a move that was seen as a huge boon for the industry as a whole. Now, however, the industry has suffered another setback. The two largest DFS operators in the US, FanDuel and DraftKings, have pulled out of New York DFS. As the state is reportedly the second-biggest market for DraftKings in 2014, it’s huge news for the industry.
What’s the story?
Four months ago, the Attorney General of New York, Eric Schneiderman, filed an injunction against DraftKings and FanDuel. In this injunction, he claimed that the sites constituted gambling enterprises, and were thus illegal. Schneiderman noted that the U.S. considers other games that involved a mix of skill and chance, such as poker, as gambling. He said DFS is no different in this respect. In addition, he stated that the sites’ advertisements pitched their offerings as being close to gambling.
The operators have maintained that daily fantasy sports are a game of skill, and are legal under US law. However, this week they complied with the Attorney General. They decided that, until the legal situation is clearer, they would cease to offer paid-entry New York DFS contests.
What happens now?
While the operators have ceased for now, this is only a temporary measure. Both are embroiled in a legal battle that is scheduled to come before the courts in September. After this – should all go well – they’ll be able to continue offering New York DFS games.
There may even be a possibility for the sites to make a quicker comeback. Lawmakers in New York have recently proposed a bill which would make daily fantasy sports officially legal.
If New York were to legalise DFS, it’s possible that any law would be similar to the one in Virginia. One state representative has noted that it would likely involve “licensing and taxes” for the DFS industry. The law would ensure that minors couldn’t take part. More details of how the law might work are available on Legal Sports Report.
For players in the state, the immediate impact is clear. If you’re on DraftKings or FanDuel, you won’t be able to take part in any more paid tournaments. However, as often tends to be the case, the impact of this decision will go far beyond just two operators, and beyond state borders too.
What are the wider implications?
Legal Sports Report has said that following the settlement between DraftKings and FanDuel and the Attorney General, it is unlikely that “any DFS operator will stay open in New York for very long”. New York is estimated to have the most users and account for the most revenue of any state for both FanDuel and DraftKings. This means New York DFS players account for a huge proportion of the market as a whole. Though some other sites, such as Yahoo!, continue to operate for the time being, it’s clear that this settlement is a huge blow for the industry.
Legal Sports Report has also speculated that, following this settlement, DraftKings may give up on trying to maintain its presence in Texas. FanDuel has already pulled out of Texas, another large state with a huge base of DFS players. Then there’s Illinois: home to almost 13 million people, including the US’ third-largest city, Chicago. There have been rumours that a similar withdrawal may be in the pipeline.
For players here in the UK, the effects of this particular decision are still unclear. Smaller operators can ill afford to lose one of their biggest – if not the biggest – DFS markets in not just the US, but the world.
But while the DFS industry is plunged into legal chaos across the USA, the UK is a far more stable market. There’s even a possiblility that more sites will come over to our shores. As it stands, the British market provides an opportunity for sites to grow without constant legal troubles. So who knows – maybe New York DFS’s loss will prove to be the UK’s gain.