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"No More Bets": New York Shuts "Illegal Gambling" Fantasy Sports Sites

A little less than a month ago, Nevada shut down fantasy sports sites, effectively telling the likes of DraftKings and FanDuel to apply for a gaming license or face a decade in prison.

As we noted at the time, the move came on the heels of an announcement by the FBI and the Justice Department that the US was investigating whether the business models of daily fantasy-sports sites violate a Congressional exemption around the legality of transfers from financial institutions to online gambling sites.

Sites like DraftKings and FanDuel rely on a loophole for “games of skill" which effectively allows them to say that betting on the “skills” of others is itself a “skill.”

 That is, if I know more about how the skills of say, one NFL player stack up against the skills of another NFL player, well then I too have a “skill”, and so therefore, sites which pay me to play my skills against the skills of other fans can exploit a Congressional exemption on financial companies transferring money to online gambling sites.

Obviously, that's a ridiculous loophole and it looks like everyone who isn't getting their cut (i.e. state and local goverments) have had just about enough of it because now, New York attorney general Eric Schneiderman is set to shut down FanDuel and DraftKings in NewYork. Here's The New York Times:

The New York State attorney general on Tuesday ordered the two biggest daily fantasy sports companies, DraftKings and FanDuel, to stop accepting bets in New York, saying that their games constituted illegal gambling under state law, according to people with knowledge of his investigation.

The cease-and-desist order by the attorney general, Eric T. Schneiderman, is a major blow to a multibillion-dollar industry that introduced sports betting to legions of young sports fans and has formed partnerships with many of the nation’s professional sports teams. Given the New York attorney general’s historic role as a consumer-protection advocate, legal experts say the action will most likely reverberate in other states where legislators and investigators are increasingly questioning whether the industry should operate unfettered by regulations that govern legalized gambling.

Fantasy sports companies contend that their games are not gambling because they involve more skill than luck and were legally sanctioned by a 2006 federal law that exempted fantasy sports from a prohibition against processing online financial wagering. That view is increasingly being challenged as fantasy sites have begun offering million-dollar prizes and bets on individual sports, such as golf, mixed martial arts and Nascar races, magnifying the element of chance and making the exemption more difficult to defend.

On Tuesday afternoon, as news of the attorney general’s order began to trickle out, DraftKings sent an email to its players, saying, “Attorney General Eric Schneiderman is considering preventing New Yorkers from playing daily fantasy sports,” and added: “Hey, New York, protect your right to keep playing daily fantasy sports. Contact the attorney general today!”

Sabrina Macias, a spokeswoman for DraftKings, said: “We’re disappointed he hasn’t taken the time to meet with us or ask any questions about our business model before his opinion.” She said the company had 500,000 users in New York State.

In a statement, FanDuel said: “Fantasy sports is a game of skill and legal under New York state law. This is a politician telling hundreds of thousands of New Yorkers they are not allowed to play a game they love and share with friends, family, co-workers and players across the country.”

Right FanDuel, that's exactly what this is and we're not sayng that's at all justified, but you shouldn't exactly be surprised.

Frankly, this is a lot like multi-level marketing or (gasp) selling drugs. That is, it's not that it necessarily should be illegal - after all, in a free society people should be allowed to do as they please with their money and their free time - but the fact is that is ultimately is illegal, which means that when you've gotten away with it for years, you can't really play the "what's going on here?!" card as though you had no idea this was coming. 

Anyway, weigh in as you will, but right or wrong the government is out to put an end to this industry and if you're a betting man (or woman) we wouldn't recommend wagering on FanDuel or DraftKings being able to fend this off.

In short.. "All. Bets. Are. Off"...