The NFL season ended poorly for New York football fans, and state Attorney General Eric Schneiderman is piling on with new fraud charges in his blitz against fantasy sports sites DraftKings and FanDuel. Daily fantasy sports have been operating legally in New York and most states for nearly a decade and attracted such investors as Fox Sports, Turner Sports, KKR and the Kraft Group. This has made them a rich political target.
November Mr. Schneiderman charged DraftKings and FanDuel with running
illegal gambling operations and ordered them to shut down in the Empire
State. According to the AG, fantasy sports are a game of chance rather
than skill, an important legal distinction used to define gambling. But
fantasy sports involve as much skill as, say, Scrabble or fantasy season
competitions hosted by ESPN.
Players form teams with salary caps from athletes whose pay approximates their value, so Cam Newton would be more expensive than Johnny Manziel.
They pay entry fees to compete against players nationwide with prizes
ranging from a couple of bucks to seven figures. The best players win
most of the time, though rookies can take home small-dollar prizes.
the New York legislature nor state gaming commission has defined
fantasy sports as gambling, which makes the AG’s case a long shot. This
may explain why Mr. Schneiderman late on New Year’s Eve amended his suit with charges of fraud and false advertising.
gubernatorial wannabe cites fantasy ads that say “taking home your
share is simple: just pick your sport, pick your players, and pick up
your cash” and “anybody can play, anybody can succeed.” If this is false
advertising, then the New York lottery—which claims it is “making more
New Yorkers rich than any other game”—is a Bigger Con.
Schneiderman says the sites prey on vulnerable young males by promising
instant gratification and “no commitment,” though the ads are less
deceptive than promotions for body-building supplements or workout
programs. He contradicts his case that fantasy sports are illegal
gambling by arguing that the sites misrepresent “the degree of skill
implicated in the games.”
The amended lawsuit demands that the
sites compensate players for their losses (i.e., entry fees) and pay
civil penalties that could run in the billions. Nearly 60 class-action
lawsuits based on similar claims are being consolidated this month in
federal court, which should pre-empt the AG’s charges. His real goal may
be to frighten away anyone who does business with the fantasy sites.
government’s gambling market share seems to be a Democratic priority
these days. Shortly before Christmas, Illinois AG Lisa Madigan issued
an opinion that fantasy sports as well as “all games of chance or skill,
when played for money, are illegal gambling in Illinois, unless
excepted” and should be outlawed, which is at least more legally
consistent than Mr. Schneiderman’s singling out daily competitions.
New York appellate court is now considering whether to allow DraftKings
and FanDuel to operate in the state while Mr. Schneiderman’s case plays
out. Letting the AG’s ruling stand pending a court review would merely
reward his prosecutorial unsportsmanlike conduct.