The Attorney General seeks a preliminary injunction prohibiting DraftKings and FanDuel from continuing to operate an illegal sports gambling business in New York," Schneiderman's office wrote in court papers filed in state Supreme Court in Manhattan.
The injunction claims that FanDuel and DraftKings' argument that DFS is not gambling "fails for two clear reasons."
"First, this view overlooks the explicit prohibition against wagering on future contingent events, a statutory test that requires no judgment of the relative importance of skill and chance—they are irrelevant to the question. Second, the key factor establishing a game of skill is not the presence of skill, but the absence of a material element of chance. Here, chance plays just as much of a role (if not more) than it does in games like poker and blackjack. A few good players in a poker tournament may rise to the top based on their skill; but the game is still gambling. So is DFS."
It goes on to point out that both companies have "aligned" themselves with the gambling space, saying FanDuel hired "a former top executive from Full Tilt, the online poker company, and affiliating with gambling industry stalwarts like 'Vegas Insider' and BetVega, a sports betting and handicapping website. For DraftKings, this has meant aligning itself closely and negotiating sponsorships with other gambling ventures, like the World Series of Poker and the Belmont Stakes."
The injunction indicates that DraftKings has "embedded gambling keywords into the programing code for its website," including phrases such as "weekly fantasy basketball betting" and "Fantasy College Football Betting," which "increases the likelihood that search engines, like Google, will send users looking for gambling straight to the DraftKings site."
As for FanDuel, Schneiderman writes that its advertisements "commonly showcase testimonials from ostensibly ordinary DFS players" and "play up the ease of playing and of winning huge cash prizes."
"The reality is that like poker, blackjack, and horseracing, a small percentage of professional gamblers use research, software, and large bankrolls to extract a disproportionate share of DFS jackpots. With poker and DFS, professional players, known as 'sharks,' profit at the expense of casual players, known as 'minnows.' The numbers show that the vast majority of players are net losers, losing far more money playing on the sites than they win. DraftKings data show that 89.3% of DFS players had an overall negative return on investment across 2013 and 2014."
The indictment also included a quote from Jeffrey L. Derevensky, Director of the International Centre for Youth Gambling Problems and High-Risk Behavior at McGill University. "DFS can lead players to a preoccupation with DFS, chasing of losses, and developing symptoms and behaviors associated with a gambling disorder."
Hours after the indictment was filed, DraftKings continued to defy the order, while FanDuel announced on its website that it would "temporarily suspending entry in paid contests for people located in New York as of 2:30 pm EST today, Tuesday, November 17th," adding that, "we maintain, unequivocally, that FanDuel has always complied with state and federal law. We look forward to vindicating our position in court next week. We will press on and fight to ensure that your right to play fantasy sports is protected, not just in New York, but across the nation."
DraftKings' approach was much different. First, it issued the following statement:
"We look forward to being afforded a full and fair opportunity to demonstrate why daily fantasy sports are legal under New York State law. We believe the Attorney General’s view of this issue is based on an incomplete understanding of the facts about how our business operates and a fundamental misinterpretation and misapplication of the law. We remain committed to ensuring that New Yorkers retain the right to continue to play the daily fantasy sports games they love."
The Boston-based company followed with an email to its customers citing, "To be clear: Your right to play DFS in New York will remain unchanged unless a New York court decides otherwise.
"As you know, we believe strongly that our games are legal and that the Attorney General’s view of the facts and the law are incorrect. We are confident in our legal position and remain committed to fighting for your right to play in New York."
The two embattled companies also released statements of defiance on Wednesday vowing to remain in New York after Schneiderman began his crusade to shut them down with cease-and-desist letters.