FanDuel, DraftKings to fight New York order halting bets

By Liana B. Baker
Downtown Manhattan and the One World Trade building (R) are seen from the observation level of the Empire State Building in the Manhattan borough of New York February 4, 2015. REUTERS/Carlo Allegri

By Liana B. Baker

(Reuters) - Daily fantasy sports sites FanDuel and DraftKings were preparing to fight back against a declaration by New York state's top prosecutor that they were running illegal gambling operations and ordered them to stop taking bets in the state.

DraftKings called the decision by New York Attorney General Eric Schneiderman "hasty and uninformed" and said it was prepared to mount a challenge in court so the company could continue operating in the state.

"We will pursue this fight to the fullest to ensure that New York fantasy sports fans do not need to stop playing," DraftKings said in a statement on Wednesday.

DraftKings and FanDuel also began mobilizing hundreds of thousands of their users in New York state, asking them to send Schneiderman emails voicing support for the games. FanDuel said they have more than 600,000 players in the state; DraftKings said there were more than 500,000 daily fantasy players there.

The two companies, which have five business days to respond to the order issued by Schneiderman on Tuesday, have continued to take money from customers in the state, they said.

DraftKings and FanDuel have both hired former New York prosecutors for advice as scrutiny by regulators and law enforcement agencies intensifies.

DraftKings and FanDuel have been at the center of a firestorm of controversy since early October when a DraftKings employee won $350,000 from a $25 entry in an American football contest on the rival FanDuel site. The two companies then banned their employees from playing, but local and federal authorities began to investigate whether the fantasy sites offered games of chance, which were essentially gambling.

Schneiderman sent "cease-and-desist" letters to the fantasy sites telling them they were in violation of state law against illegal gambling because they "are clearly placing bets on events outside of their control or influence, specifically on the real-game performance of professional athletes."

In the games, fans pay to compete for daily cash prizes based on the performance of professional athletes. Schneiderman's order does not apply to season-long fantasy sports contests.

(Additional reporting by Suzanne Barlyn)