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New York moves to lift ban on daily fantasy sports sites

By Eric DuVall
A DraftKings logo is displayed in New York City on November 13, 2015. The daily fantasy sports site was banned by New York Attorney General Eric Schneiderman last year, saying the sites violated gambling laws. Legislation passed Saturday reverses that ban. File Photo by John Angelillo/UPI
A DraftKings logo is displayed in New York City on November 13, 2015. The daily fantasy sports site was banned by New York Attorney General Eric Schneiderman last year, saying the sites violated gambling laws. Legislation passed Saturday reverses that ban. File Photo by John Angelillo/UPI | License Photo

ALBANY, N.Y., June 18 (UPI) -- The New York Legislature has reached a deal to allow daily fantasy sports websites to resume operations in the state after they were shut down last year for violating the state's gambling laws.

The two major sites, DraftKings and FanDuel, were shut down by New York Attorney General Eric Schneiderman in November after his office determined the sites were tantamount to gambling, rather than games of skill. Gambling is restricted in New York to site-specific casinos and racetracks.

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The central question was whether the sites awarded prize money generated from entrance fees based on a participant's knowledge of sports, or whether winners essentially got lucky.

The sites allow users a predetermined "salary cap" and participants have to construct a roster of real athletes in a given sport, with the best ones costing the highest salary. Players' real-world performances determine a team's final score.

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Supporters of the legislation to allow the sites to reopen in New York argued constructing a winning team requires astute knowledge of a sport. Detractors likened it to placing bets on a roulette table and hoping the right number comes up.

Daily fantasy sports turned into big business seemingly overnight. Capitalizing on the popularity of fantasy sports leagues that last the length of a season -- particularly for the NFL -- New York had about 300,000 people actively playing on daily fantasy sites when they were shut down, according to The Wall Street Journal. A private accounting firm told ESPN that New Yorkers were responsible for $268.3 million in entry fees, second only in the country to California.

Schneiderman made national headlines in November when he sent cease-and-desist orders to DraftKings and FanDuel, essentially shutting them down, noting the blurry line between luck, skill and professional sports gambling required special legislation to make it legal. Advertising from the two sites during sporting events outranked even beer commercials in their frequency, promising free entry fees and weekly $1 million winners to attract new players.

"As I have said from the start of my office's investigation into daily fantasy sports, my job is to enforce the law," Schneiderman said in a statement Saturday. "Today, the Legislature has amended the law to legalize daily fantasy sports contests, a law that will be my job to enforce and defend. We will nevertheless continue to pursue our claims that DraftKings and FanDuel previously engaged in false advertising and consumer fraud."

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Supporters of the legislation called the bill's passage a win for sports fans.

The legislation taxes the sites at 15 percent of gross revenue within the state, far less than what casinos are taxed. It limits games to professional sports, excluding college and high school contests, and requires participants to be at least 18. Also, employees of the companies will be barred from participating in the games themselves.

Tax revenue generated will be added to the state's lottery fund, which in part benefits education funding.

"I'm thrilled. I think we did the right thing for the millions of fans, for the state of New York, for education. All the way around, I think we did the right thing," Assemblyman Dean Murray, a co-sponsor of the bill, said.

New York Gov. Andrew Cuomo has 10 days to sign the bill. ESPN reports Cuomo was actively engaged with lawmakers to draft the legislation and is expected to sign it.

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