Patchwork of laws poses legal quicksand for fantasy sports
The New York attorney general’s decision that daily fantasy sports betting sites FanDuel and DraftKings are illegal gambling operations in his state is a blow to the companies, but the multibillion-dollar industry could have more legal headaches yet to come.
While the sites have opted not to do business in a handful of states, including Washington, where regulators have made clear they’re not welcome, they have been up and running in a number of others – such as New York – where they’re legally dubious. Several states in which the companies are operating have laws similar to New York and Washington, while a few, such as Tennessee, Arkansas and Vermont, have even stricter prohibitions.
That could pose more risk than the companies or their backers – big media companies and professional sports leagues – have let on. Federal law criminalizes gambling businesses that operate in violation of state law, with penalties that can include prison time, fines and seizure of assets.
“This creates a real vulnerability for the industry,” said Daniel Wallach, a sports and gaming lawyer in Florida. “That statute gives the government the power to take it all away.”
By his count, daily fantasy sports sites have been operating on shaky legal ground in about a dozen states.
New York Attorney General Eric Schneiderman on Tuesday ordered DraftKings and FanDuel to stop accepting bets in the state. He said the companies were offering contests of chance – illegal gambling under state law – and he accused the companies of misleading customers about their chances of winning in a barrage of advertisements. The companies said Wednesday they intend to fight to remain in New York, in court if necessary.