DraftKings and FanDuel are two of the biggest Daily Fantasy Sports operators in the United States and have a strong player database in New York. The DFS industry came under fire last year from attorney general Eric Schneiderman who went after DFS operators on the basis that they were offering DFS games that were similar to casino games and doing so without a license.
While DraftKings and FanDuel contested those claims on the basis that DFS games do not operate on chance but require skill, Schneiderman continued to amount pressure on DFS operators via legal proceedings. Both operators have had to deal with lawsuits that would cost them millions of dollars in penalties and fines but now appear to have reached a compromise with Schneiderman.
DraftKings and FanDuel have agreed to stop offering paid DFS games in New York in return for Schneiderman to stop all lawsuit proceedings against the company and not pursue any financial recourse. Schneiderman stated that he was happy with the decision made as his objective in going after the DFS industry was to get operators to stop offering paid games as they were not licensed to do so.
This comes as a big blow to FanDuel as the company has its headquarters in Manhattan. In a statement, a representative from FanDuel said “New York is a critical state for FanDuel. 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.”
Eilers & Krejcik Gaming LLC, a company that specializes in gaming research states that New York has the biggest market for DFS operators with a thirteen percent market share with California coming in second with a ten percent market share. The firm estimates that DraftKings and FanDuel will end up losing around $35 million a year due to the withdrawal of paid games from New York.
Both companies have had a tough six months as they have been forced to withdraw paid DFS games from nine states. FanDuel has also pulled out of Texas making it a total of ten states where paid DFS games are no longer offered. Now that both companies have caved in to Schneiderman’s demands, there could be other states who decide to go after DraftKings and FanDuel.
State legislators are expected to review a bill this year that looks to legalize the DFS industry and should they pass the bill, DraftKings and FanDuel will once again be able to offer paid DFS games in New York.
However Schneiderman has stated that even if state legislators legalize the DFS industry, he might still consider going after DraftKings and FanDuel over consumer protection breaches and false advertising campaigns.