In what seems like a body blow for the daily fantasy industry, New York Attorney General Eric Schneiderman has issued a cease and desist order to the two biggest operators, FanDuel and DraftKings. This move has effectively outlawed daily fantasy for the state’s 19 million inhabitants.
Schneiderman has ordered both sites to stop their operations for New York State resident customers, who are believed to be responsible for 10% of the market.
Inevitably, other DFS operators will also shut their business in the states. Schneiderman has clearly signalled he thinks their business model constitutes illegal gambling.
Operators Fight Back
Unsurprisingly, both FanDuel and DraftKings have come out fighting. The two sites have vowed to contest Schneiderman’s actions in court. They have retained renowned litigators Gibson, Dunn & Crutcher LLP to represent them. This notwithstanding, the future looks a little murky for DFS. Regulation is likely to be in the offing.
So why might the New York ban not be such as bad thing for the industry?
- Regulation brings costs, but protection for customers and security for investors.
- Regulation will be disproportionately more costly for smaller competitors, and favour big players like DraftKings and FanDuel.
- It may force the industry to concentrate on other territories – i.e. the UK!
- It will end some of the shadier practices (i.e. with employees, allegedly, using insider information to enter and win competitions).
Frankly, regulation is preferable to an outright ban for all concerned. Let’s face it, DFS is at the very least a hybrid skill/chance game and therefore deserves regulation.