DraftKings, FanDuel Will Shut Down Paid Contests In New York — For Now

Daily fantasy sports sites DraftKings and FanDuel have agreed to suspend paid contests in New York until an appellate court hearing in September on whether the sites violate state gambling laws.

The agreement, struck with New York Attorney General Eric Schneiderman, comes as the companies are lobbying state lawmakers to pass legislation that would explicitly legalize the industry.

As NPR's Joel Rose reports, New York is the second-biggest market for daily fantasy sports, after California.

Schneiderman "sued the two companies last year, arguing that they're essentially gambling operations and therefore illegal under state law," as Joel reports. "The fantasy sports companies deny that. They say they're offering games of skill, not chance."

On Dec. 11, a New York district court — acting on an enforcement action from Schneiderman — barred the companies from accepting bets. Later that day, a state appeals court overruled the decision and said the companies could continue operations until the case had been fully considered. Monday's deal to accept the terms of the preliminary injunction is a victory, albeit a temporary one, for Schneiderman.

"I'm pleased to announce that both FanDuel and DraftKings will stop taking bets in New York State, consistent with New York State law and the cease-and-desist orders my office issued at the outset of this matter," Schneiderman said in a statement. "As I've said from the start, my job is to enforce the law, and starting today, DraftKings and FanDuel will abide by it."

Should the state Legislature not legalize daily fantasy sports contests before June 30, then the appellate court's September ruling will stand. According to the agreement, if the court rules against the companies, the two sites will not make any further appeals. If the court rules in favor of the companies, the attorney general's office must drop the crux of its case against the companies.

In his statement Monday, Schneiderman also said that regardless of the agreements, the state's claims of false advertising and consumer fraud will continue.

A statement from DraftKings read, in part, "We will continue to work with state lawmakers to enact fantasy sports legislation so that New Yorkers can play the fantasy games they love."

FanDuel also released a statement:

"New York is a critical state for FanDuel. FanDuel is headquartered in Manhattan, where we employ more than 170 young, smart, passionate fans who are committed to innovating and providing the best fantasy experience possible. We are proud to be one of New York's largest startup companies, and while it is disheartening for us to restrict access to paid contests in our home state, we believe this is in the best interest of our company, the fantasy industry and our players while we continue to pursue legal clarity in New York."

It also urged players to contact their government representatives about daily fantasy sports.