he agreement with the attorney general, Eric T. Schneiderman, was expected to cost the companies a total of $8 million to $12 million, according to the two people. It would also require the companies to acknowledge the findings of Mr. Schneiderman’s investigation into fraudulent practices and perhaps require them to institute even stronger consumer protections than those adopted in August when Gov. Andrew M. Cuomo made the games legal in New York.
Justine Sacco, a spokeswoman for FanDuel, said, “While we cannot comment on the details, we can confirm that we have been in ongoing settlement negotiations with the New York attorney general’s office. They have been tough but fair, and we hope to reach an acceptable resolution.”
A spokesman for DraftKings did not respond to a request for comment on Sunday.
DraftKings and FanDuel are so short of cash, according to the two people familiar with the negotiations, that they have asked Mr. Schneiderman’s office if they can pay the final settlement in installments, and they have conceded that they are having difficulty meeting their day-to-day obligations
Within the past three weeks, the New York-based FanDuel has laid off more than 60 people, and both companies have acknowledged that they are months behind in their payments to vendors, especially to the array of public relations and lobbying firms that they have employed across the nation to persuade individual state legislatures to legalize daily fantasy games — the most critical component of rebuilding their business.
New York was the eighth state to declare daily fantasy sports legal, and the companies are facing expensive efforts to have their games legalized in the big markets of Illinois and Texas. Some of the companies’ executives have concluded that the market cannot sustain both of them and that they will need to merge if they are to rebuild the market.
Last year, at the beginning of the N.F.L. season, DraftKings and FanDuel overwhelmed sports broadcasts with hundreds of millions of dollars in advertising that emphasized their get-rich-quick prize payoffs. Then, it was a largely unregulated, multibillion-dollar industry in which players paid a fee on a website, assembled virtual rosters of players in pursuit of jackpots ranging from $22 to $2 million, and scored points based on the real-world outcomes of professional games.
Daily fantasy sports appeared to be a virtual cash machine. The companies were valued at over $1 billion each. Their investors included Major League Baseball and the N.B.A.; the Dallas Cowboys owner Jerry Jones and the New England Patriots owner Robert K. Kraft; and major media companies like NBC.
Lobbying and legal costs, however, have damaged their bottom lines.
Last October, after a DraftKings employee won a major jackpot on FanDuel’s site, Mr. Schneiderman’s office began an inquiry into whether employees of the companies had used inside information to prey on customers on each other’s sites.
Soon, scores of class-action lawsuits were filed in courts across the country
Mr. Schneiderman shut down the industry in New York, declaring daily fantasy sports to be illegal gambling, but laid the groundwork for a deal in March when he suggested a June 30 deadline for the State Legislature to act to address the games’ legal status. It did, and Governor Cuomo signed the bill into law in August.
Mr. Schneiderman’s office, however, continued to investigate the business practices of DraftKings and FanDuel. Among its findings was that the companies had misled players in those get-rich-quick advertisements about the likelihood that they would achieve a return on their investments.
In 2013-14, for example, investigators found that nearly 90 percent of DraftKings’ customers lost money, suggesting a major gulf between the casual players — or “minnows,” in betting parlance — and the professional players known as sharks.