Industry Updates

DFS Roundup: Fate of NY Remains Unclear; Mass DFS Educational Forum; $3 Milly Maker

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It was an interesting (albeit blood pressure raising) week for the daily fantasy sports industry, as Judge Manuel Mendez finally made his decision on whether or not to grant NY Attorney General Eric Schneiderman’s request for a temporary injunction against DraftKings and FanDuel.

Since the hearing where both sides made their case before Judge Mendez, the DFS world has been waiting for the ruling, and now they have it, and it’s basically a worst case scenario, as Judge Mendez ruled in favor of the AG, and did so by not even mentioning the DFS industry’s greatest argument, the skillfulness of DFS.

Judge Mendez’s decision (and the subsequent appeal) occurred just days after the New York legislature talked about regulating DFS, and just a day before the Massachusetts Gaming Commission hosted a hearing to talk DFS regulation.

A New York quagmire

New York judge rules on DFS

On Friday New York Supreme Court Judge Manuel Mendez entered his long-awaited opinion on DFS by granting New York Attorney General Eric Schneiderman’s temporary injunction against DraftKings and FanDuel. The ruling calls on the two companies to cease offering DFS contests in the state of New York (FanDuel had already done so but DraftKings continued to operate in NY) within 30 days.

It should be noted, the temporary injunction is not a determination on DFS’s legality in New York, it’s merely a request by the AG to shutdown the companies until the case is heard in court. The court case isn’t expected to be decided for several months.

NY decision overturned on appeal

However, the two companies filed immediate appeals, and the appeal was heard later that day by appellate Judge Pain Feinman. Judge Feinman ruled (more accurately, issued a motion to stay) that the companies could continue to operate in New York until a panel of appellate court judges rules on Judge Mendez’s decision.

This decision not only offered DraftKings a reprieve, it also led to FanDuel once again allowing New York residents to enter its contests, with the caveat that they would still not be accepting any new deposits from New York residents.

However, the companies only have a couple weeks before the full appellate panel rules, and the general feeling seems to be they will not overturn Judge Mendez’s opinion. If they don’t, DraftKings and FanDuel will have to leave New York until the case is heard in court, a process that will likely last several months.

How payment processors, the moneyed stakeholders, and the general public react to the current quagmire in New York is still somewhat unclear. What is clear: New York is turning into a nightmare for DFS, as a ton of money (legal fees) is being spent, and the rulings in New York could very well embolden AG’s in other states with similarly written gaming laws to act.

Massachusetts hearing on DFS

The Massachusetts Gaming Commission hosted a hearing (dubbed an educational forum)  to discuss the state’s ongoing efforts to regulate the daily fantasy sports industry, and nip any potential New York issues in the bud.

Pretty much everyone in the state is on the same page when it comes to DFS’s legality and the need to regulate the industry without simultaneously killing the current operators in the space.

One of my favorite panels of the hearing was the last one, which featured former MGC commissioner James McHugh, LegalSportsReport.com’s Chris Grove, and attorney Daniel Wallach. If I had to pick an analyst, an attorney, and a regulator to discuss DFS this would be my dream panel, so I highly recommend anyone interested in DFS regulation watch the hearing for themselves to get an idea of the level of complexity the regulation of DFS possesses.

My favorite line of the hearing was Grove’s response to one of Judge McHugh’s semi-left-field ideas on regulation, “Sure, let’s do that.” The statement may have gotten a chuckle from the crowd, but Grove made it clear that while facetious, there really isn’t a working regulatory model anyone can turn to, and the clock is running on DFS so something has to be done.

The Boston Globe’s Curt Woodward penned an excellent column on the hearing.

Of note…

– DraftKings hosted a $3 entry Millionaire Maker contest this weekend.

– During the MGC educational forum on DFS Chris Grove noted that DFS (the industry) entry fees for 2015 has been adjusted down from $3.7 billion to $3.1 billion by Eilers Research – or as Grove called it, “a pretty dramatic haircut.”

– South Dakota Attorney General Marty Jackley appears to be taking the New York approach to DFS, as he stated while he wouldn’t seek felony indictments, he would consider other alternatives, including civil remedies.

– DFS site DraftDay along with the National Council on Problem Gambling have proposed a set of consumer protections for the DFS industry to follow.

– Both DraftKings and FanDuel have beefed up their player verification and geolocation programs. DraftKings is now using GeoComply to verify player locations and FanDuel has added a new layer to player verification, as users must now divulge their Social Security Numbers.

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