Daily fantasy sports websites DraftKings and FanDuel said Monday they would stop operating paid contests in New York.
The decision by DraftKings and FanDuel comes on the heels of a lawsuit brought by the attorney general of New York, who sued the two companies, accusing them of violating the state's anti-gambling legislation.
Lawyers for DraftKings and FanDuel have argued that their clients could not have violated gambling statutes because they were taking in entry fees and not wagers.
New York attorney general Eric Schneiderman, as part of Monday's agreement, will suspend the lawsuit until New York lawmakers decide whether to pass laws regulating the daily sports contests offered by companies like FanDuel and DraftKings.
If lawmakers pass such a law, then New York will drop the lawsuit. If no law is passed, then the lawsuit will continue and hearings will be scheduled for September.
Both companies have agreed not to participate in any contests in New York until the lawsuit is settled.
In corresponding statements, FanDuel and DraftKings said that while the loss of the New York market was significant, finding a legislative solution is necessary for the future of their business and for the millions who play daily fantasy games.
"New York is a critical state for FanDuel," the company said. "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."
DraftKings also issued a statement: "We are an industry leader in technology, innovation and consumer protections, and we are grateful to the hundreds of thousands of New Yorkers who have enjoyed playing fantasy sports on DraftKings for the last four years. We will continue to work with state lawmakers to enact fantasy sports legislation so that New Yorkers can play the fantasy games they love."
Schneiderman began investigating daily fantasy sports after allegations arose earlier this year that employees of the two companies were using inside information to win games.
"As I've said from the start, my job is to enforce the law, and starting (Monday), DraftKings and FanDuel will abide by it," Schneiderman said in a statement.