Hawaiian Prosecutor tells FanDuel and DraftKings To Cease Operations

Earlier today, Honolulu prosecuting attorney Keith M. Kaneshiro sent cease and desist letters to the CEOs of FanDuel and DraftKings.

The demand reads in part:

“This letter constitutes a demand that DraftKings and Fanduel immediately cease and desist from accepting wagers from residents of the city and County of Honolulu in connection with daily fantasy contests.

Gambling is illegal in Hawaii, and on January 27, 2016, the state Attorney General issued a formal advisory opinion confirming what I have long believed: That daily fantasy sports contests ae a form of gambling and violate Hawaii statues.

While DraftKings and FanDuel represent that their contests are games of skill because players select their lineups, Hawaii law specifically states that ‘a contest of chance means any contest, game, gaming scheme, or gaming device in which the outcome depends in a material degree upon an element of chance, notwithstanding that skill of the contests may also be a factor therein.

Like lawmakers and law enforcement in close to a dozen states, I reject the notion that the 2006 Unlawful Internet Gambling Enforcement Act exempts fantasy sports contests from state laws as it does not define what constitutes gambling. Hawaii’s gambling laws are clear and DraftKings and FanDuel are violating those laws.

Therefore, as Prosecuting Attorney General for the City and County of Honolulu, I must demand that DraftKings and FanDuel immediately halt accepting wagers from Oahu residents and refrain from doing further business on Oahu.”

This news comes less than a week after the Hawaiian Attorney General opined that daily fantasy sports contests run afoul of state gambling laws. Just a day after the AG’s opinion, several Hawaiian legislators introduced bills in the House and Senate to regulate and legalize fantasy sports.

Those bills seek to clarify the legality of daily fantasy contests, introduce regulations to oversee the industry and require a $25,000 registration fee from operators. The proposals also include a variety of regulations that set the minimum participation age at 18, ensure segregation of funds and require sites to offer self-exclusion programs. If those bills pass, today’s cease and desist orders will be rendered moot.

Neither DraftKings nor FanDuel has issued a public statement in response to the cease and desist order. When New York’s attorney general issued a similar order, both sites took the issue to court and secured a stay order that resulted in both sites being able to continue doing business until the matter is settled in court.

However, Hawaii does not represent as important a market as New York. The population is smaller and neither site has a physical presence in Hawaii (FanDuel has a headquarters in New York City). It will be interesting to see how the sites respond to today’s news.

Kaneshiro’s cease and desist order escalates the battle between legalization and prohibition of fantasy sports in Hawaii. Between the state attorney general’s opinion, lawmaker efforts to legalize fantasy sports and today’s news, things are certainly heating up in Hawaii.