FanDuel and DraftKings Cease New York Operations Pending Appeal

On Monday, March 21st, FanDuel and DraftKings ceased offering their daily fantasy sports products in the state of New York, and are now pinning their hopes on a successful appeal against the lawsuit brought against them by the attorney general last December.
The recent incentive to halt their business was provided by AG Eric Schneiderman (photo), whose lawsuit sought the return of all money spent by New York customers on the site last year, in addition to a further $5,000 fine per person. With more than 600,000 customers, this figure could conceivably have amounted to more than $3 billion, but the attorney general has now agreed to halt litigation until the company’s appeal is heard in September.
Under the terms of the settlement, FanDuel and DraftKings are excused from paying fines and penalties for operating ‘illegally’ in New York, although they could still face charges for “false advertising and consumer fraud”, according to the New York AG. Commenting on the settlement, Schneiderman said:
“As I’ve said from the start, my job is to enforce the law, and starting today, DraftKings and FanDuel will abide by it. Today’s agreement also creates an expedited path to resolve this litigation should that law change or upon a decision by the appellate division.”
In the meantime, FanDuel and DraftKings will be hoping that New York will legalize fantasy sports sometime between now and September. New York state Senator John Bonacic, for instance, has already introduced his sponsored bill, S 6793, which calls for companies to pay a one-time registration fee of $500,000, as well as a 15% tax on their gross revenues. This bill is seen as the most likely piece of legislation to succeed, and the huge one-off fee it sets will also be viewed favorably by FanDuel and DraftKings, as the figure should be enough to price their competitors out of the market. Commenting on FanDuel’s present situation, the company released the following statement yesterday:
“We are proud to be one of New York’s largest startup companies, and while it is disheartening for us to restrict access to paid contests in our home state, we believe this is in the best interest of our company, the fantasy industry and our players while we continue to pursue legal clarity in New York.”

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