DraftKings and FanDuel are Facing Hurdles in New York

The debate over whether or not daily fantasy sports should be considered illegal gambling has been decided in the state of New York, which followed Nevada’s lead and determined that DraftKings and FanDuel need to cease operations immediately.

The two biggest daily fantasy sports websites tried to prevent New York Attorney General Eric Schneiderman from following through on the shutdown, but they were denied by Judge Manuel Mendez on Monday, resulting in a court hearing scheduled for November 25.

DraftKings and FanDuel have each argued that daily fantasy sports are “games of skill” and not gambling, urging customers to support them by protesting the decision.

New York is obviously a much larger market than Nevada, as DraftKings has reportedly already received almost $100 million from players in the state and does not want to lose out on that potential revenue for the rest of the football season.

Meanwhile, FanDuel has partially cooperated by not taking any additional paid entries in New York as of last Friday while still hoping to find a way to get Schneiderman’s ruling overturned.

Both companies made more than $1 million less on their biggest contests last weekend according to SuperLobby.com, which tracks fantasy sports data. The possibility of that continuing, with the losses growing exponentially not only in New York but also across the country, could put the future of the $4 billion industry in serious jeopardy.

Like gambling, the goal of many lawmakers is to simply regulate daily fantasy sports if they are going to continue to exist, making them legal and taxing the businesses that run the contests in addition to their customers.

Nevada had required DraftKings and FanDuel to apply for a gaming license to operate there because the state did not see any difference between fantasy sports and sports gambling. Neither chose to do so.

Licensing and regulation is likely the answer to the problem, with Massachusetts already exploring the possibilities to keep daily fantasy sports legal in the state.

The Massachusetts Gaming Commission realizes there is a lot of money to be made with daily fantasy sports and does not seem too eager to prohibit contests just yet. It is worth noting that DraftKings is located in Boston, while FanDuel is based in New York.