With attorneys general across the country turning their attention to online fantasy sports sites, many are being shut down as states figure out what regulations to impose on the industry. But two of the nation’s biggest sites are proactively filing a lawsuit in New York to prevent the state from shutting them down.
The lawsuits come on the heels of a Friday protest by several hundred fans (and a few employees) of FanDuel and DraftKings, the nation’s two largest fantasy sports betting sites, held at the Manhattan offices of New York Attorney General Eric Schneiderman.
Protesters held signs that read “Keep Schneiderman off my lineup” and “Schneiderman is a total bust,” while chanting phrases such as “Let us play” and “Game of skill.”
The latter phrase is key to the argument between a mountain of regulations labeling the sties as “gambling” or whether regulations are unwarranted because betting on fantasy sports is instead a “game of skill.” The distinction is important because if fantasy sports is “gambling” that opens the industry up for strict oversight by state and federal regulators.
The New York Attorney General has suggested that the sites be blacked out in the Empire Wtate while the legislature reviews the issue and proposes new rules to regulate it. But FanDuel and DraftKings say that this shut down is unconstitutional.
Pursuant to that, the two sites filed separate lawsuits on Friday to put a halt to the proposed shut down.
In its filing, DraftKings asked a court to declare that the shutdown is unconstitutional and demanded that the courts block the AG from taking any further action.
“Today, we have taken decisive legal action to prevent a unilateral, misinformed and legally misguided attempt by the New York attorney general to act as ‘judge, jury, and executioner’ for daily fantasy sports in New York,” DraftKings said in a statement released Friday.
Similar moves are being performed in Nevada as state regulators review the fantasy sports industry.
The increased focus on the fantasy sites came after The New York Times revealed a possible insider trading scandal involving fantasy football betting websites FanDuel and DraftKings. The scandal broke after an article in the Times charged that an employee of DraftKings released player data and then personally made $350,000 using the insider info on rival site FanDuel. The paper said that employees of the sites used early data to make their own bets win big money but an independent investigation commissioned by DraftKings noted the impossibility of this given the bet coming 40 minutes before the availability of the information.
Follow Warner Todd Huston on Twitter @warnerthuston or email the author at igcolonel@hotmail.com