Fantasy sports sites allowed to operate in New York during appeal

[January 12, 2016]  By Suzanne Barlyn and John McCrank
 
 NEW YORK (Reuters) - Leading daily fantasy sports companies FanDuel and DraftKings will be allowed to keep operating in New York while they battle the state's attorney general, who wants them shut down there, an appeals court confirmed on Monday.

The move allows the companies to keep operating during an appeal of a civil action initiated by New York Attorney General Eric Schneiderman in November, a potentially extensive process.

The temporary stay of an injunction granted by a New York state trial court on Dec. 11 was extended on Friday by a panel of New York State Appeals Court judges.

The court will hear the appeal in May, but it is not known when the case will be decided.

"Daily fantasy sports are entirely legal, as they have been recognized to be over the past seven or eight years," said David Boies, a DraftKings attorney, in an interview.

In fantasy sports, contestants build a roster of players from real-life pro sports teams and accumulate points based on how those players perform in actual games. Backers of the games argue they are skilled-based entertainment products, not wagering.

But critics say the daily versions allow fans to spend money on the games with a frequency akin to sports betting.

"DraftKings and FanDuel are indeed operating illegal gambling operations in New York and should be permanently barred from doing business in New York," Damien LaVera, a spokesman for Schneiderman, said in a statement.

The long-term stay is a bright spot amid the mounting legal troubles for FanDuel and DraftKings, whose daily fantasy sports businesses have been deemed illegal gambling in three states. Class-action lawsuits against the two companies, filed by daily fantasy sports players who claim to have lost money because of the sites' illegal operations, are also piling up.

Boies also said DraftKings is working with legislatures and attorneys general across the country, including in New York and Massachusetts, to ensure that appropriate consumer protections are in place.

Massachusetts' attorney general on Monday said it would hold a public hearing regarding its proposed consumer protection regulations for daily fantasy sports contest operators in that state on Tuesday.

Schneiderman ramped up his case against DraftKings and FanDuel in late December, in an amended lawsuit that asked them to give back all the money they made in New York state.

The lawsuit also asks that the two companies provide an accounting of the money they collected from New York-based consumers.

(Reporting by Suzanne Barlyn; additional reporting by John McCrank; editing by G Crosse)

[© 2016 Thomson Reuters. All rights reserved.]

Copyright 2016 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.