EW YORK A.G. STILL GUNNING FOR DAILY FANTASY SPORTS FIRMS (Update)
Schneiderman says “false advertising and consumer fraud” actions are still being pursued against DraftKings and FanDuel.
The New York Attorney General, Eric Schneiderman, put something of a damper on the legalization celebrations at daily fantasy firms Saturday, announcing that his office intends to continue its action for “false advertising and consumer fraud” against market leaders DraftKings and FanDuel in respect of their activities prior to March 21 this year.
InfoPowa readers will recall that the AGs litigation against the DFS companies is based on what the AG claims were misleading marketing claims by the companies on the ease with which novices could win big prizes, when in reality novices win less frequently than the experienced and well-resourced professional players they are pitted against.
On March 21 this year the AG agreed a deal that he would hold off on an illegal gambling prosecution and ancillary fraudulent marketing litigation if the two market leaders suspended operations in New York whilst the state Legislature finalised new DFS laws, setting a deadline for this to occur by June 30.
Friday and early Saturdays crash-passage of the DFS legalization measures through the Assembly and Senate (see previous InfoPowa reports) met that deadline, and now Schneiderman appears to feel that the truce is over and he is free to continue the fraudulent marketing action, although his view that DFS is illegal gambling is now moot following the decision of the legislators.
Schneiderman’s office issued a statement Saturday confirming it “will nevertheless continue to pursue our claims” that the operators engaged in fraudulent marketing.
DraftKings and FanDuel may not be out of the woods yet, however; following the passage of the new DFS law legal observers have opined that there could be other legal challenges ahead.
Specifically, they claim that a consumer or a business could challenge the new law on grounds that it conflicts and violates other laws such as New York Penal Law 225.00 (which makes gaming contests illegal where chance is a meaningful element); and Article I, Section 9 of the New York Constitution which bans most forms of gambling, and requires a voter referendum to legalize games that constitute gambling.
Noted gaming legal expert Daniel Wallach told the publication SI.com that although New York legislators have tried to work around the idea that DFS is a skill game and not gambling, any judicial hearing would focus on the law itself rather than any justification they may try to attach to it.
"Wallach believes that such a review could lead a judge to find the new DFS law contemplates gambling and thus violates the state constitution and other laws," the publication reports.
Wallach pointed out that the new law provides for oversight and regulation by a state gambling commission, asking "doesn’t that tell you something?”
He also noted that the DFS legalization “contains protections for ‘problem players’ that are reminiscent of compulsive gambling safeguards typically found in gambling laws” and that a judge would also have to consider the fact that the state AG had opined that DFS constituted gambling.
Other experts have postulated that the New York law could conflict with federal laws such as the Professional and Amateur Sports Prohibition Act (PASPA), which prohibits the ability of New York and 45 states to licence, sponsor or authorize sports betting, and one familiar now to most online gambling operators – the Unlawful Internet Gambling Enforcement Act, which may permit certain types of fantasy sport…though not necessarily DFS