New exhibits and material entered into evidence in the pending court cases between the New York attorney general and FanDuel and DraftKings shed new light on the arguments that the sites will make in an emergency hearing on Wednesday.
That included new information about DraftKings and its potential noncompliance with the Unlawful Internet Gambling Enforcement Act. The evidence also indicates that the Fantasy Sports Trade Association removed enforcement language from its charter over possible UIGEA compliance issues.
DraftKings and FanDuel also filed motions opposing the AG’s motion for a preliminary injunction, which can be seen here and here.
DraftKings and the UIGEA
The most interesting part of the new filings were memos regarding DraftKings and the UIGEA involving the Fantasy Sports Trade Association. The minutes of an FSTA committee call in May — first reported by ESPN last week — were entered into evidence.
The FSTA minutes
In those minutes, the legality of DraftKings golf and NASCAR fantasy contests is discussed, as is DraftKings’ compliance with the FSTA’s paid-entry contest operator charter, which states that operators must follow the UIGEA. From the minutes; the “Jason” referenced is DraftKings CEO Jason Robins:
Jason acknowledged that Golf and NASCAR do not comply with the letter of UIGEA, but argued that UIGEA was written when daily fantasy didn’t exist. … He also pointed out that UIGEA is an enforcement statute – not the “governing law.” He indicated that state law supersedes UIGEA.
And then:
Jason stated that he does not that operators should not need to operate consistently with UIGEA if they can operate lawfully under state law. Jason said that DraftKings has done extensive testing and can demonstrate that fantasy golf and NASCAR are games of skill and are therefore legal under state law.
And later in the minutes:
Jason indicated that DraftKings would be proposing a change to the paid operator charter. It was also discussed that if the change doesn’t pass, then there will have to be a decision of what to do next since DraftKings will be out of compliance with it.
DraftKings’ response to the minutes
In ESPN’s report, Robins took issue with the accuracy of those minutes.
Asked about the accuracy of the transcript, Robins told ESPN on Thursday night, “The minutes were inaccurate, and in a follow-up meeting with the full board, the first thing I said was just that — the minutes were inaccurate and I did not say that. What I did say is that the law is more complex and that state law would supersede UIGEA. I never said we were in violation, and was clear about that as soon as I saw the minutes.”
More evidence than just the minutes
Also entered into evidence was an email sent by FSTA president Paul Charchian to the group’s board of directors in wake of the call referenced in the minutes above. That email appears to contradict Robins’ assessment of the minutes in the ESPN story.
In the email, Charchian wrote:
For those who may not be aware, DraftKings is offering single-event contests for NASCAR, PGA and MMA. These contests are not in compliance with the carve-out language in UIGEA. And, since DraftKings is not in compliance with UIGEA, they’re not in compliance with the FSTA’s paid-entry contest operator charter.
Last week, the compliance committee took up the subject, and a spirited conversation ensued. There are several issues, but at the highest level, a disagreement exists about whether the UIGEA should be part of the the FSTA’s charter.
Enforcement language in FSTA charter appears to be removed
The subject of the UIGEA came up again in an FSTA board meeting held in September, the minutes of which were also entered into evidence. From those minutes:
The FSTA’s Paid Entry Contest Operator Charter, found at http://fsta.org/about/fsta-paid-entry-contest-operator-charter/, is amended to remove the second sentence from the first paragraph that states: “Any violation that is not remedied within 30 days of notification by the FSTA can result in revocation of FSTA membership at the FSTA board’s sole discretion.”
The minutes indicated that that amendment passed, after a discussion by the board. Robins offered this during that discussion, according to the minutes:
Jason: UIGEA has been a good catalyst from a PR/symbolic perspective but it doesn’t apply as administration of law. We believe games were legal before UIGEA and are still legal after UIGEA. One concern: Continuing to push it publicly as a safe harbor creates risk. We need to be sounder in our legal arguments for what will hold up in court (e.g., skill).
UIGEA compliance still appears as a part of the FSTA charter on the group’s website, as does the passage that was theoretically removed from the charter. Of note is that the FSTA is behind the creation of the Fantasy Sports Control Agency, which will seek to offer self regulation of the industry.
The removal of the enforcement language, from the documents entered into evidence, appears to be entirely linked to DraftKings and worries about its compliance with the UIGEA.
The FSTA had no comment when contacted by Legal Sports Report.
Other interesting things entered into NY evidence
Several new affidavits and exhibits were also entered into evidence Monday night and Tuesday morning:
- Affidavits were submitted by both sides claiming that DFS contests offered by DraftKings and FanDuel are games of skill (here and here) or games of chance or a form of sports wagering (here).
- Data showing the prize distribution among New York users at FanDuel.
- An affidavit from Robins.
