How Much Fallout Is The New York AG Action Creating For Daily Fantasy Sports?

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DFS scandal fallout

The cease-and-desist notices issued by the New York attorney general to FanDuel and DraftKings — along with Tuesday’s request for an injunction to stop them from operating there — have had an impact on many facets of the industry, as well as outside of the Empire State.

How big has that impact been? The short answer is the fallout has been somewhat minimal in the short term, but could gain momentum in the long term.

The DFS operators

A few operators had already not accepted New York residents prior to Attorney General Eric Schneiderman’s notice, based on the idea that DFS is a gray area under state law.

But at least a few others pulled out in the past week, including FanDuel on Tuesday (after the AG filed suit in the state supreme court).

Yahoo, despite reportedly being a target of the NY AG as well, appears to still be operational in the New York market. New York does not appear on a list of states where residents cannot play, currently.

The tipping point for operators could be Nov. 25, when an emergency hearing will he held to deal with the requests for injunction from the AG and also filed by DraftKings and FanDuel.

If the injunction from the AG is granted, it would be difficult to imagine operators continuing to allow users in New York state — and that would include DraftKings, which is still operational. If the operators win, it may even lead to FanDuel reentering the market after a brief hiatus.

DraftKings and FanDuel have both made changes in the past week to their platforms; whether these changes are linked to anything occurring in New York is unknown.

FanDuel has increased identity verification protocols. DraftKings is now offering responsible gaming protocols on its site and appears to be uploading enhanced geolocation abilities to stop people from playing in jurisdictions where DFS is illegal.

Other states and DFS

There had already been growing momentum from state legislators and attorneys general to take a closer look at the DFS industry — after the Nevada AG’s opinion that DFS is gambling under state law and the increased scrutiny that started early in October.

But the New York AG seems to have sparked even more interest in DFS in states around the country. Certainly, it’s difficult to parse what role New York specifically has played, but there has been increased chatter in the past week in:

There are also several states that have similar gaming laws to New York, and it’s possible officials in those jurisdictions may take more interest in the subject after next week’s hearing.

No state AG has taken direct action in the wake of the NY AG’s actions.

The pro sports leagues

So far, there has been little evidence that the support that the professional sports leagues have given to FanDuel and DraftKings has waned, at least publicly.

The New York Post was on an island in characterizing the NFL’s support of DFS as a bit shakier than had been thought previously; there have been no other reports that touched on the same subject matter.

FanDuel’s sponsorship of part of appears to be gone for the time being:

In a vacuum, it’s difficult to know how much to read into that, especially without more insight from the NFL or FanDuel. It was a small presence to start with, and FanDuel may have even asked for a lower profile, given recent events.

All of the partnerships between pro sports teams and either DraftKings and FanDuel appear to still be intact.

It’s of note that all of the top leagues are headquartered in New York. If the state supreme court grants the injunction requested by Schneiderman on the grounds that DraftKings and FanDuel are gambling operations, will their stances change?

Payment processors

Payment processors were certainly not thrilled with the New York attorney general’s C&D notice; at least one major processor, Vantiv, told DraftKings and FanDuel to exit New York in the wake of the AG action. DraftKings, however, actually sued Vantiv to force it to keep processing payments in New York and won.

The risks the processors are willing to take with respect to DFS is clearly less than that of the operators, and how they react moving forward will be a story worth watching.

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