NY Attorney General Shuts Down Daily Fantasy Sports Sites, Because Grandstanding

from the here-we-go-again dept

We've talked a lot in the past about how various state Attorneys General love to grandstand in ways where they get headlines that they can hold up to claim they're "protecting the public from evil corporations," even when there's no legal basis for it. Usually it's for the sake of the headlines, because most state Attorneys General use their office as a stepping stone for Governor or Senator. In the last few years, the "pick on high profile company x" plan has involved a lot of internet companies -- because they're in the news so much. And, now, New York's Attorney General Eric Schneiderman has declared daily fantasy sports sites like FanDuel and Draft Kings to be illegal and ordered them to stop accepting users in NY.

As you probably know, daily fantasy sports sites (specifically those two) have exploded in popularity in the last year or so, mostly based on something of a loophole in anti-online gambling laws in the US. When those laws were passed, at the demands of the casino business (and bizarrely attached to a bill about protecting our ports), there was an exception for "fantasy sports." At the time, of course, this meant fantasy sports leagues where you joined for the full season, or at least something along those lines. Then Fan Duel (which started out in Scotland as a prediction market for betting on the news) realized that it could make a sort of "daily" fantasy sports league that was legal under these rules, and Draft Kings followed a couple years later. With their explosion in popularity, it's no surprise that they'd start receiving regulatory scrutiny. Indeed, Congress and the Justice Department have both kicked off investigations of these sites in the past couple of months.

It wouldn't surprise me at all to find that both sites will soon face much stricter regulatory control. That's the nature of the game, especially when it involves something that, if not "gambling" certainly feels like gambling to many policymakers, and the supporters of moral panics. Of course, rushing in to regulate will almost certainly cause problems, blocking off potential innovations in this field that could be much better for all involved.

And thus, NY's Eric Schneiderman enters the fray, reinforcing his reputation as someone willing to attack internet platforms that most users love, just because of a few small incidents of potential abuse. In this case, he's basically cut off these two platforms without any sort of court ruling.
"It is clear that DraftKings and FanDuel are the leaders of a massive, multibillion-dollar scheme intended to evade the law and fleece sports fans across the country," Mr. Schneiderman said, adding, "Today we have sent a clear message: not in New York, and not on my watch."
I recognize that some people can have serious problems with gambling that can create problems in their lives -- but many more are able to enjoy gambling for what it is. And it's kind of bizarre for Eric Schneiderman to declare "fantasy sports" gambling when he represents the state where Wall Street exists -- which involves significantly more "gambling" than anything coming out of two internet companies that many people seem to like using. People aren't being "fleeced" when they willingly participate in one of these daily fantasy sports sites. If there are -- as Schneiderman suggests -- misleading ads about the likelihood of winning or the amounts people can win, take issue with that, rather than shutting down the whole thing.

In the meantime, doing a big grandstanding rush job to shut these sites down to get all the headlines, without the benefit of a careful review and thoughtful understanding of the issues at play just seems like Schneiderman, once again, reminding innovative startups that New York is not welcoming for such innovation.

Reader Comments

Subscribe: RSS

View by: Time | Thread


  • icon
    Manabi (profile), 11 Nov 2015 @ 2:10pm

    They brought this on themselves with insider trading

    Sorry, this one is a self-inflicted wound. It's not just that they're popular now, and not just that they've apparently been buying up nearly all the advertising around sports. It's mostly because of the big insider trading scandal. It seems employees of one company would use the info they got to play the other company's games to win huge money. And it was both companies doing it to each other. See here.

    So no sympathy for these guys, they brought this one on themselves.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 11 Nov 2015 @ 5:29pm

      Re: They brought this on themselves with insider trading

      And Wall Street never had insider trading. Guess we should shut down that as well ( I know it would be a good idea ).

      So there were a few incidents with these 2 websites, how many times have people been caught insider trading on wall street? More than what has happened with these websites.

      I think the AG is wrong here and I am sure the courts will agree with the companies, the AG does not get to state what is law and what is not.

      reply to this | link to this | view in chronology ]

      • icon
        BJC (profile), 11 Nov 2015 @ 5:54pm

        Re: Re: They brought this on themselves with insider trading

        The NY AG does, as part of his job, provide official opinions on "what the law is" in the absence of a contrary court ruling; see the list here: http://www.ag.ny.gov/appeals-and-opinions/numerical-index

        I focus on this seemingly pedantic point because I really think we need to divide the question between
        A) Does, in fact, NY law prohibit FanDuel, etc.?
        and
        B) Regardless of whether NY law does, should it?

        The (B) question is easy. Either you are in favor of gambling restrictions, or you aren't. But your answer to (B) doesn't change what the New York state and regulatory bodies actually say about it.

        The (A) question is highly technical and requires us to get into the weeds of N.Y. gaming law. Before Schneiderman's office filed suit, they all did a bunch of research so that there was at least a reasonable legal argument that FanDuel, etc. were illegal under N.Y. law as it currently stands. Maybe the Court of Appeals will disagree, but without looking closely at what the actual prohibitions are in the law and regulatory codes, I have to believe that the AG's office thinks they have an argument with a reasonable chance of convincing the judges on the Court of Appeals.

        And, of course, if the Court of Appeals so rules, whether or not we think it makes any sense whatsoever, it is the law. It might be bad law, but it is.

        reply to this | link to this | view in chronology ]

        • identicon
          Anonymous Coward, 12 Nov 2015 @ 6:06am

          Re: Re: Re: They brought this on themselves with insider trading

          I like the way you think. Too many times we get rulings not based on actual law or we get people calling for illegal/unconstitutional laws. Either we are a nation of law and order or we are not. If we are, then the law should be followed. If we don't like the laws, we have mechanisms to change them. But until they are changed, they should be followed.

          My statement above is not for or against these sites or online gambling in general. I do not like gambling so I don't participate. Heck, I don't like many of our laws either.

          reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 11 Nov 2015 @ 6:52pm

      Re: They brought this on themselves with insider trading

      If you think about it for a few minutes, you'll also realize that it's quite easy for anyone inside one of these companies, either acting on their own or on behalf of the company, to rig the process so that they win.

      Legitimate gambling operations are strictly regulated and are audited to ensure that they adhere to the regulations. Casinos, for example, don't need to rig their slot machines because they deliver a fine ROI without it; and they don't want to rig them because the consequences of being caught doing so are heavy. No such regulation and auditing exists here; these DFS sites could be operating fairly...or they could be complete scams. I'm betting (heh) on the latter.

      reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 12 Nov 2015 @ 6:07am

        Re: Re: They brought this on themselves with insider trading

        Legitimate gambling operations are strictly regulated

        Most of this regulation is used as a barrier to entry against possible competitors.

        reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 12 Nov 2015 @ 6:25am

        Re: Re: They brought this on themselves with insider trading

        Most legitimate casinos are regularly audited. And if a dispute erupts between a gambler and a casino a 3rd party auditer (often working for the government) can quickly come in to do an audit to settle the dispute.

        Such protections don't exist online.

        reply to this | link to this | view in chronology ]

        • icon
          tqk (profile), 12 Nov 2015 @ 1:26pm

          Re: Re: Re: They brought this on themselves with insider trading

          ... a 3rd party auditer (often working for the government) can quickly come in to do an audit to settle the dispute. Such protections don't exist online.

          That should be easier to do on a computer, including online. Every server process from ntp through packaging managers write logfiles. It'd be simple to put together a program that inhales multiple logs and sorts by datestamp connecting like records to reconstruct exactly what happened and when, perusable at leisure as long as the logs exist.

          reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 12 Nov 2015 @ 6:06am

      Re: They brought this on themselves with insider trading

      Explain how you can use information from your website to make money on another when dealing with Live Sports, please.

      If you don't have your lineup set before the games start, you can't play that game.

      So are you talking about looking at the lineup of everyone else and using that information to set your lineup before the games begin?

      If so, then you can just look at any fantasy sports related website and go with what the 'experts' recommend. There are hundreds or thousands of them to refer to.

      Now, if they were using their OWN website, that's different. Or if they colluded with each other, then I can see an issue, but information, by itself , and after the fact has little value to a player.

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 11 Nov 2015 @ 2:16pm

    I wish they'd spend more time grandstanding about things that are important, such as...well...just about everything John Oliver talks about, rather than low-hanging fruit that people actually enjoy.
    If a DA wanted to get up on their soapbox and challenge government corruption and regulatory capture, I'd support them 100%.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 12 Nov 2015 @ 6:09am

      Re:

      Yes because we should all be taking our advice from comedians.

      reply to this | link to this | view in chronology ]

      • icon
        nasch (profile), 12 Nov 2015 @ 7:07am

        Re: Re:

        Yes because we should all be taking our advice from comedians.

        Unless you have watched his show, you are speaking from ignorance. He uses it to spotlight corruption, injustice, and other social issues. For example:

        - capital punishment
        - net neutrality
        - immigration
        - income inequality
        - prisons
        - nuclear weapons
        - student debt
        - civil asset forfeiture
        - judicial elections
        - municipal violations
        - government surveillance
        - patents
        - child labor

        He's not just a comedian, and the show is not just for laughs.

        reply to this | link to this | view in chronology ]

        • identicon
          Anonymous Coward, 12 Nov 2015 @ 8:39am

          Re: Re: Re:

          Yes, and I am sure he has no political bias either. So if you agree with his views, he is a genius.

          reply to this | link to this | view in chronology ]

          • icon
            nasch (profile), 12 Nov 2015 @ 8:53am

            Re: Re: Re: Re:

            Yes, and I am sure he has no political bias either.

            I never said he was unbiased.

            So if you agree with his views, he is a genius.

            I also didn't say anything about his views, or that he is a genius, or even that he is right. So congratulations, your entire post was a complete non sequitur.

            reply to this | link to this | view in chronology ]

            • identicon
              Anonymous Coward, 12 Nov 2015 @ 9:15am

              Re: Re: Re: Re: Re:

              No, my post and your response proves my initial point, we should not take advice from comedians. Thanks.

              reply to this | link to this | view in chronology ]

              • icon
                John Fenderson (profile), 12 Nov 2015 @ 9:37am

                Re: Re: Re: Re: Re: Re:

                And who would you recommend listening to instead? With very rare exceptions, comedians seem to be the only ones speaking truth in traditional media these days.

                reply to this | link to this | view in chronology ]

                • identicon
                  Anonymous Coward, 12 Nov 2015 @ 10:01am

                  Re: Re: Re: Re: Re: Re: Re:

                  Truth? No, bias? Yes. They do call out a lot of situations, but depending on which side of the fence you fall, you may or may not go for their solution. But then again, lots of talk shows call out problems and solutions as well, but I bet you don't like some of those either.

                  reply to this | link to this | view in chronology ]

                  • icon
                    nasch (profile), 12 Nov 2015 @ 1:48pm

                    Re: Re: Re: Re: Re: Re: Re: Re:

                    They do call out a lot of situations, but depending on which side of the fence you fall, you may or may not go for their solution.

                    The ones I'm familiar with are more focused on bringing attention to perhaps overlooked problems, rather than presenting solutions. Who do you have in mind when you mention comedians proposing solutions to societal ills?

                    reply to this | link to this | view in chronology ]

              • icon
                nasch (profile), 12 Nov 2015 @ 9:48am

                Re: Re: Re: Re: Re: Re:

                No, my post and your response proves my initial point, we should not take advice from comedians.

                Argumentum ad hominem. Saying someone is a comedian does nothing to prove him wrong, so no, you have failed to prove anything at all.

                reply to this | link to this | view in chronology ]

                • identicon
                  Anonymous Coward, 12 Nov 2015 @ 10:02am

                  Re: Re: Re: Re: Re: Re: Re:

                  Saying someone is a comedian does not make them right either, as your first post implied. Oops.

                  reply to this | link to this | view in chronology ]

                  • identicon
                    Anonymous Coward, 12 Nov 2015 @ 12:18pm

                    Re: Re: Re: Re: Re: Re: Re: Re:

                    "implied" does not mean what you seem to think it means.

                    reply to this | link to this | view in chronology ]

                  • icon
                    nasch (profile), 12 Nov 2015 @ 1:50pm

                    Re: Re: Re: Re: Re: Re: Re: Re:

                    Saying someone is a comedian does not make them right either, as your first post implied.

                    As the other person mentioned, you do seem to be struggling with English. You're now claiming that I implied John Oliver is right (about what exactly I'm not sure) because he is a comedian. Can you explain to me what part of my post implied that, and how?

                    reply to this | link to this | view in chronology ]

                    • identicon
                      Anonymous Coward, 12 Nov 2015 @ 3:46pm

                      Re: Re: Re: Re: Re: Re: Re: Re: Re:

                      Well, since don't seem to understand your own post, let me help you out. You said we should pay attention to nearly everything John Oliver talks about. Who says everything he talks about is worth talking about, besides maybe you? So no, no problems with English here. I stand by my statements.

                      reply to this | link to this | view in chronology ]

                      • icon
                        nasch (profile), 12 Nov 2015 @ 4:06pm

                        Re: Re: Re: Re: Re: Re: Re: Re: Re: Re:

                        You said we should pay attention to nearly everything John Oliver talks about.

                        I said it's stupid to ignore him because he is a comedian. If you want to ignore him because you have heard what he has to say and you think he's dumb or wrong or crazy, that's totally different.

                        reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 11 Nov 2015 @ 2:28pm

    What's wrong with this whole idea anyway?

    (Looking forward to joining http://fantasy-pro-wrestling-teams.co.tv as soon as it starts paying off on bets.)

    reply to this | link to this | view in chronology ]

  • icon
    Mark Murphy (profile), 11 Nov 2015 @ 2:34pm

    Horse Racing

    In the DA's defense, I'll argue that fantasy sports is fairly closely analogous to horse racing, with respect to whether or not it is gambling.

    In both cases, there can be a measure of skill involved, such as researching past performance, particularly with respect to key factors like surface conditions (wet track/wet playing field). However, with that skill comes a large dose of luck to determine exactly who winds up winning and losing, both in the real-world performance (for the horses and the athletes) and in the betting performance.

    I don't think it is unreasonable to say that these sorts of fantasy sports should fall under the same regulatory umbrella as betting on horse racing. Whether that means that it is banned (only some states allow betting on horse racing AFAIK), regulated (for those states that allow it), or free-for-all (dumping all such regulation, anyone can bet on anything) is a separate debate.

    reply to this | link to this | view in chronology ]

    • icon
      tqk (profile), 11 Nov 2015 @ 6:15pm

      Re: Horse Racing

      In both cases, there can be a measure of skill involved, such as researching past performance, particularly with respect to key factors like surface conditions (wet track/wet playing field).

      I'd just like to point out everything there applies as well to the little NFL lottery cards you can buy in any corner store and gas station and supermarket. I know a guy who plays them. He seldom loses.

      reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 12 Nov 2015 @ 6:10am

        Re: Re: Horse Racing

        Yes, but that is state sanctioned gambling, which as everyone knows, if the state sanctions it, it is ok. ;)

        reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 11 Nov 2015 @ 2:38pm

    Nevada strategy

    Some of us might prefer the strategy of Nevada, which rather than taking the traditional (moralist) approach of trying to stamp out age-old human vices such as gambling and prostitution, decided to regulate and tax them instead.

    reply to this | link to this | view in chronology ]

  • identicon
    Christenson, 11 Nov 2015 @ 3:01pm

    Wall St versus Fantasy Sports Gambling

    The difference between Wall St gambling and Fantasy Sports gambling is that Wall St does it with OTHER people's money!

    State regulation of anything "Internet" simply doesn't make sense -- any reasonably clever soul can set up a mail box connection and an internet connection pretty well in whatever state they like, and then there are the american indian reservations!

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 11 Nov 2015 @ 3:51pm

    1. Describe your online gambling enterprise "Fantasy Sports".

    2. Profit.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 11 Nov 2015 @ 3:59pm

    ...so since when did gambling have a time limit?

    reply to this | link to this | view in chronology ]

  • icon
    Mason Wheeler (profile), 11 Nov 2015 @ 4:22pm

    Of course, rushing in to regulate will almost certainly cause problems, blocking off potential innovations in this field that could be much better for all involved.

    Why would blocking off "potential innovations" in the field of illegal online gambling be a problem? Not everything innovative is automatically good.

    Remember, there are two great fools. One says "this is old, therefore it is good," and the other says "this is new, therefore it is better."

    reply to this | link to this | view in chronology ]

    • icon
      Whatever (profile), 11 Nov 2015 @ 4:33pm

      Re:

      Shhh! You are letting out another secret nobody wants to talk about. Innovation isn't always good or to our benefit, but that goes against a basic pillar of the Techdirt world.

      I think that daily fantasy sports has the potential for abuse, from the teams, players, and officials who may be motivated to screw around with the results of a single event in a longer season for profit. With no real tracking or regulation, it would be very easy for the systems to be "gamed". Not saying it happens, but the potential is there.

      Where there is a lot of money on the table, there is almost always someone trying to figure out how to get more of it, better so if they can do it without being easily traced down.

      reply to this | link to this | view in chronology ]

      • icon
        techflaws (profile), 11 Nov 2015 @ 9:45pm

        Re: Re:

        Innovation isn't always good or to our benefit, but that goes against a basic pillar of the Techdirt world.

        And once again you're full of shit.

        reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 11 Nov 2015 @ 10:23pm

        Re: Re:

        Where there is a lot of money on the table, there is almost always someone trying to figure out how to get more of it, better so if they can do it without being easily traced down.

        This. One of things that I've learned from decades of security practice is that almost nobody even thinks about defending their operation from insider attack. And out of the few people that do, almost nobody does it effectively.

        There's should be no doubt in anyone's mind that any number of people inside and outside these gambling operations are gaming their systems. Of course they are: it's easy, it's unlikely to be detected, and it's immensely profitable. I wouldn't even be surprised if these operations are fully aware of it -- but choosing to remain silent, because the PR hit they'd take by disclosure would be much worse than just losing a few million here and there.

        I also wouldn't be surprised if the operations were designed to facilitate that -- because one of the best ways to siphon cash out of your own operation is to make it look like someone else is doing it by exploiting a security hole. Plausible deniability, you know, very useful.

        reply to this | link to this | view in chronology ]

    • icon
      Agonistes (profile), 11 Nov 2015 @ 5:03pm

      Re:

      Things or strategies developed illegally for illegal purposes that thrive despite the threat of legal retribution are usually going to be better alternatives than the "sanctioned" ones, at least for that niche in time or concept. More to the point, however, something that is moral isn't always legal and vice versa.

      reply to this | link to this | view in chronology ]

    • icon
      Chris-Mouse (profile), 12 Nov 2015 @ 6:02am

      Re:

      It's more like one fool says all innovation is bad, while the other says all innovation is good. Your insistance that blocking innovation before it happens is a good idea is proof that you are one of the former.

      reply to this | link to this | view in chronology ]

  • icon
    RichS (profile), 11 Nov 2015 @ 4:52pm

    It's stupid, but if it keeps their damn commercials off the TVs and radios around here it's worth it.

    reply to this | link to this | view in chronology ]

  • icon
    BJC (profile), 11 Nov 2015 @ 5:10pm

    Need to see statute before judging

    The question of whether FanDuel and similar are "gambling" under state law depends on what the state law says, and the article doesn't have a link to the N.Y. state statutes in question. This is kind of a big deal.

    If the argument here is that sports betting shouldn't be regulated, I don't have much of an argument with that. But the argument that commercial sports betting FanDuel/Draft Kings style isn't regulated depends on what the statute says, and I strongly suspect in N.Y. it's a too-cute reading of the law.

    I'm not spending my day on clumsy legislative search engines, but a brief search of the NY State official code seems to say N.Y. Racing, Pari-Mutuel Wagering and Breeding Law 1367 is the appropriate code. As I read it, the law basically bans sports betting unless (A) federal law changes, or (B) N.Y. state passes appropriate regulations.

    If this is the law, I think Schneiderman's right from the point of "what the law says" (which should always be considered separately from "what the law should be in a perfect world"). There isn't really an exception for much of anything sports betting-wise in N.Y., which makes sense as N.Y. loves to regulate things.

    If I'm wrong, I'd love to know which is the actual state law at issue so we can talk intelligently about what the "fantasy sports" exception actually is in N.Y. and why FanDuel, etc. are in it.

    reply to this | link to this | view in chronology ]

  • icon
    Paul Alan Levy (profile), 11 Nov 2015 @ 7:26pm

    Not an "order" and not "without any court ruling"

    Forgive me, but I wonder whether this is overstated: "he's basically cut off these two platforms without any sort of court ruling."

    As I read the letter linked from the NY Times article (http://www.nytimes.com/interactive/2015/11/10/sports/document-final-nyag-fanduel-letter-11-10-2015- signed.html), Schneiderman sent the two companies a letter demanding that they cease and desist, and giving pre-litigation notice of an intent to file a lawsuit. Maybe it is more intimidating to get such a letter from the Attorney General of a state than from Marty Singer, but it is no more an "order" than a letter from Singer or any other of the players in the cease-and-desist letter field whom we all love to detest.

    And of course it is without a court order, but Schneiderman is threatening to go to court. The court would then decide whether to issue an order. What am I missing?

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 11 Nov 2015 @ 8:26pm

    Commerce Clause

    I wonder how the Dormant Commerce Clause would enter into this, if at all.

    reply to this | link to this | view in chronology ]

    • icon
      BJC (profile), 11 Nov 2015 @ 9:20pm

      Re: Commerce Clause

      Not at all; there's no effort by the state to treat in-state commerce differently than cross-state commerce without the permission of the federal government.

      You might be thinking of the Supremacy Clause, if something in the federal sports betting laws preempted state law in this matter, but that's not the case with gambling at current -- both states and the federal government get to criminalize it to whatever extent they desire.

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 12 Nov 2015 @ 7:15am

    If it quacks like a duck

    This is no different than gambling on horses. That's also a game of skill, with some chance thrown in. You research the horses, pick the ones you think will win, place, or show, and hope chance doesn't throw too much of a monkey wrench in the works.

    In Fantasy Football, you use your skill choosing players, and hope that they don't drop a couple of passes, or get stopped charging through the pack at the two-yard line. It's still ultimately a game of chance at the end of the day.

    If they changed this back to a payoff at the end of the season, they'd be fine, from what I understand.

    reply to this | link to this | view in chronology ]

  • identicon
    US Citizen Born and Raised, 12 Nov 2015 @ 9:17am

    Isn't this tyranny?

    Not sure, but isn't attorney general post an appointed post? Anyway he wouldn't have got my vote for taking upon himself more of this crap for the sake of the good of all New Yorkers. I hate that lawyers have such a position of authority to rule our lives without a single vote representing them. Same goes for all those lousy insurance companies and their fear-mongering bullshit ads spammed daily across America.

    reply to this | link to this | view in chronology ]


Add Your Comment

Have a Techdirt Account? Sign in now. Want one? Register here
Get Techdirt’s Daily Email
Use markdown for basic formatting. HTML is no longer supported.
  Save me a cookie
Follow Techdirt
Techdirt Gear
Shop Now: Copying Is Not Theft
Advertisement
Report this ad  |  Hide Techdirt ads
Essential Reading
Techdirt Deals
Report this ad  |  Hide Techdirt ads
Techdirt Insider Chat
Advertisement
Report this ad  |  Hide Techdirt ads
Recent Stories
Advertisement
Report this ad  |  Hide Techdirt ads

Close

Email This

This feature is only available to registered users. Register or sign in to use it.