New York judge rules against DraftKings, FanDuel

A New York Supreme Court justice on Friday barred daily fantasy sports sites DraftKings and FanDuel from doing business in New York.

Justice Manuel Mendez ordered the country's two biggest fantasy sports companies to stop taking bets in New York after the state's attorney general, Eric Schneiderman, argued their operations were illegal gambling.

Lawyers for DraftKings and FanDuel argued that their clients could not have violated gambling statutes because they were taking in entry fees and not wagers.

However, Mendez ruled what DraftKings and FanDuel took in were bets as defined by state law.

"New York State penal law does not refer to 'wagering' or 'betting,' rather it states that a person, 'risks something of value,'" Mendez wrote. "The payment of an 'entry fee' as high as $10,600 on one or more contests daily could certainly be deemed risking 'something of value.'"

The two daily fantasy sports (DFS) superpowers are under intense scrutiny in other states, which have moved to declare the games illegal betting.

The companies have 30 days to respond. An attorney representing DraftKings said his client would appeal the decision.

According to ESPN.com, there are at least 600,000 New Yorkers who play daily fantasy on DraftKings and FanDuel, having put up more than $200 million in entry fees combined in 2015.

FanDuel, which has its main headquarters in New York, and DraftKings, which has a satellite office in New York but is based in Boston, can still operate their national businesses out of those Manhattan offices but can't do business with anyone within the state.

On Nov. 10, the New York attorney general sent cease-and-desist demands to FanDuel and DraftKings. FanDuel stopped accepting New York residents in its paid contests in November, while DraftKings continued.

Former NBA commissioner David Stern called the legal probing of daily fantasy sports nonsense during his appearance Thursday at the Sports Business Journal Intercollegiate Athletics Forum in New York.

"The current issues around it are ridiculous. It's clearly a game of skill," Stern said.

The NBA is an equity stakeholder in FanDuel, and other sports leagues have strong partnerships -- and owners on the investment board -- of DraftKings.

Dallas Cowboys owner Jerry Jones has defended his investment in DraftKings, saying it "creates more interest" for fans.

Jones' investment in DraftKings is permitted by the NFL, but teams themselves are not allowed to hold shares in daily fantasy sports companies. The Kraft Group, which owns the New England Patriots, also invests in DraftKings.

The College Football Playoff will not feature DFS ads prominent during other sporting events from FanDuel and DraftKings. The NCAA also announced previously that the ads would be prohibited during the men's and women's postseason basketball tournaments in March.

In October, the Navada Gaming Control Board and the state's attorney general determined that daily fantasy sites should be defined as sports gambling and need a license to operate in that state. FanDuel and DraftKings stopped operating in Nevada.