DraftKings and FanDuel can keep doing business in New York for at least a little while longer. After a hearing today, New York State Supreme Court Judge Manuel Mendez said that he will rule soon on New York State Attorney General Eric Schneiderman’s petition to bar the daily fantasy sports sites from doing business in the Empire State pending a full trial.
The decision followed arguments by both sides centering on the question of whether people who use the sites are gambling on games of chance — which would make them illegal — or merely paying entry fees to compete in games of skill.
“If chance is a material element, it doesn’t matter how much ‘skill’ is involved,” says Kathleen McGee, the Chief of the Internet Bureau in the state Attorney General’s office.
She compared the games to poker, where “some players fare better than others” but it’s still deemed “a game of chance under New York law.”
McGee also dismissed the idea that players are paying to participate, but not betting. The way the law is written, the prohibition could apply to instances where people put up “something of value” in order to put themselves in a position to win.
But DraftKings lawyer John Kiernan said that the payment “is not a wager ” and players are not “risking something of true value.”
He also says that these are games of skill “under any reasonable definition.” Although the games involve an element of luck, so do most sports. “That doesn’t alter that there’s some element of skill.” He noted that players must diversify the players they pick — they can’t just adopt an existing team. As a result “they feel like competitors…They believe their efforts make a difference.”
DraftKings said in a statement that it “presented compelling evidence that Daily Fantasy Sports competitions are as legal now as they have been for the past seven years that New Yorkers have been playing them. We look forward to Justice Mendez’s ruling.”
The outcome of the case could make a big difference to major broadcast and sports networks. Bernstein Research analyst Todd Juenger figures the fantasy firms spent $134 million on TV advertising in Q3, accounting for 59% of the overall growth in TV ad sales.