NY Attorney General Wants Fantasy Sites to Refund All Customers

That rascally New York Attorney General Eric Schneiderman is at it again. Just hours before New Years Eve celebrations commenced at Times Square, he amended the state’s claim against FanDuel and DraftKings to demand complete refunds for every state resident who has paid an entry fee. As if that wasn’t enough, he is also demanding a $5,000 fine for every instance of “illegal gambling” that the NY DFS sites have engaged in.

The latest news came right at the tail end of 2015 with Schneiderman asking for FanDuel and DraftKings to refund every entry fee paid by New York customers. According to ABC News, this would amount to $200 million in entry fees paid by the state’s 600,000+ customers last year alone. The amendment also asks the court to fine both sites $5,000 for every violate of state gambling laws.

Previously, the New York attorney general simply directed FanDuel and DraftKings to stop doing business. A New York Supreme Court Justice sided with Schneiderman and validated the order for both sites to cease NY operations immediately. However, the sites managed to convince an appeals court to stay the order and allow them to continue doing business in New York through January.

This latest news stands in stark contrast to a previous post in which we noted that the situation may not be as dire as it appears. Even though NY may have an aggressive Attorney General, other lawmakers in the state have expressed a desire to legalize and regulate daily fantasy sports. The chairman of the NY Committee on Racing and Wagering has specifically said they have plans to legalize fantasy sports if the state does eventually deem them illegal gambling operations.

Today’s news changes the outlook a bit. It looks like the Attorney General is intent on doubling down on his assault of the industry. He could be trying to soften them up for a yet-to-come deal of some sort or he may actually want to outright destroy the industry altogether. It is tough to read his motivations, but what is clear is that he is pulling no punches.

DraftKings responded to a request for comment from ABC news with the following:

“Like the NYAG original complaint, it is based on the fundamental misunderstanding of fantasy sports competitions. Originally, the NYAG claimed that daily fantasy sports were illegal gambling because they were games of chance. That was disproven. Now, the NYAG complains that DFS contests are so much contests of skill that some advertising is misleading because, the NYAG says, certain ads imply that DFS contests are games of chance. This claim, too, is baseless.”

An appellate court will hear arguments from both sides on Monday regarding that temporary stay mentioned above. The outcome of that hearing will either keep the temporary stay in effect or tell both daily fantasy sites to exit New York immediately. We hope to get more news on that case early next week.

This whole New York situation is odd. Other states are taking a closer look at daily fantasy sports, but Eric Schneiderman is going after the sites with a unique ferocity. He doesn’t appear content with simply sending the issue to the courts to let them sort it out; it’s as if he wants to destroy the business model as quickly as possible. Whatever the case may be, the FanDuel and DraftKings legal teams have their work cut out for them.

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