Editor’s note: The headline of this story has changed and some content added in light of questions regarding the framing and timing of MLB’s correspondence with DraftKings.
Many daily fantasy sports sites — including DraftKings and FanDuel — continued to operate in New York or returned to active status following a stay of a preliminary injunction in an ongoing court battle in the state.
Despite that good news last month, the pressure on DFS operators who remain is growing with the report of another financial institution pulling out of New York.
The matter of the legality of DFS will not be fully settled in the courts for months — if not longer after appeals. But the New York attorney general, Eric Schneiderman, set off a fight in the state by issuing cease-and-desist orders to DraftKings and FanDuel in November, a move that has triggered similar negative opinions by AGs in other states.
Citigroup and DFS
According to a report from Bloomberg, the financial services institution Citigroup would block transactions relating to DraftKings and FanDuel.
From Bloomberg:
The ban will stand until the courts make a final decision, Jennifer Bombardier, a spokeswoman for New York-based Citigroup, said Friday in an e-mailed statement. Representatives for FanDuel and Boston-based DraftKings didn’t immediately respond to requests for comment.
The move by Citigroup will hurt the sites’ ability to service deposits and withdrawals for New York users. PayPal is still serving the New York market.
The news also comes soon after Vantiv — which processes payments via credit cards for DraftKings and FanDuel, among other DFS operators — indicated last week its intention to leave the DFS market entirely because of legal concerns. Vantiv confirmed that move in an earnings call this week.
In November, Vantiv told DraftKings and FanDuel to leave the New York market, as well. DraftKings obtained a temporary restraining order against Vantiv pulling its services in New York.
MLB and DraftKings
A New York Times report indicated that Major League Baseball — a partner with and investor in DraftKings — might be getting cold feet about the site continuing to take users in New York.
From the NYT:
And now Major League Baseball has formally notified DraftKings that it might terminate its exclusive marketing agreement with the league if the company failed to comply with New York State law, according to two people with knowledge of the matter.
The NYT then revised this section in a later rewrite of the story:
The legal questions in New York have also led Major League Baseball to put DraftKings on notice: According to two people with knowledge of the matter, Major League Baseball has formally notified the company that it reserves the right to terminate its exclusive marketing agreement with the sport if the courts find daily fantasy to be in violation of New York law.
DraftKings offered the following statement to ESPN after the NYT report:
Statement from DraftKings re: partnership with Major League Baseball. pic.twitter.com/AM9nTw1bqq
— David Payne Purdum (@DavidPurdum) February 5, 2016
The timing of the letter referenced by the NYT was being called into question.
Letter from MLB to DraftKings regarding potential termination of marketing relationship, reported by NY Times, was sent three months ago.
— David Payne Purdum (@DavidPurdum) February 5, 2016
If that is indeed the correspondence being referenced, that letter would have been sent before the stay that is allowing sites to continue doing business in New York.
Sports business reporter Eric Fisher offered what he knew about the situation via social media:
A letter was sent from MLB to DraftKings legality in NY and issues therein. But that was before the holidays and described as procedural
— Eric Fisher (@AEricFisher) February 5, 2016
Industry sources: no imminent changes re MLB/DraftKings relationship.
— Eric Fisher (@AEricFisher) February 5, 2016
MLB cemented its relationship with DraftKings last year, as the DFS site became the official daily fantasy partner of the league. DraftKings also has deals in place with almost every MLB team.
Even in the wake of increased scrutiny in recent months, Commissioner Rob Manfred has remained supportive of DraftKings, at least publicly, and insists that DFS is a game of skill and not illegal gambling, in his opinion.
Is any of that enough to leave New York?
DraftKings, at least, has made no indication since November that it has had any intention of leaving the New York market. FanDuel had pulled out of New York for a short time before reentering after the stay.
Citigroup’s move is certainly a blow, but it may not mean that sites like DraftKings and the rest of the industry will exit, when there are still some ways for players to fund accounts. Several credit companies still allow DFS transactions.
Vantiv, while a major piece of the puzzle currently for DFS sites, may be able to be replaced by operators.
Clearly, the report that Major League Baseball may want DraftKings out of New York is the biggest threat to continued operation in the state (other than the AG action, itself). But if the MLB-DraftKings interaction reported by NYT indeed took place in December, it may mean very little as far as MLB’s current thinking.
The framing and timing of MLB’s communication (as reported by the NYT) with DraftKings are certainly important; for instance, DraftKings would not stay in New York given a negative final court ruling. It would be hard to believe that DraftKings could defy MLB’s wishes — if it actually would ever demand DraftKings’ exit — without terminating the relationship.
Given the recent reluctance of a portion of the financial industry to be involved in fantasy sports in New York, it certainly has a chance of impacting MLB’s thinking. There is also the perhaps coincidental linkage that Citigroup’s name is on the New York Mets’ stadium.
TungCheung / Shutterstock.com
