The Daily Fantasy Sports (DFS) market is a multi-billion dollar market that was having a great run in the United States until the last couple of months when a controversy involving insider trading information between DraftKings and FanDuel caused authorities and legislators to turn their attention to the DFS industry.
DraftKings and FanDuel are the two biggest players in the industry and dominate the majority of the market. The Nevada gaming commission recently decided to ban DFS from the state declaring that the industry was similar to the casino industry and companies should be allowed to operate only after obtaining a gaming license.
This state ban caused a number of other states to also look into the DFS industry and New York appears to be the next state that could ban DFS.
Attorney General Eric Schneiderman has petitioned a court in New York to suspend all DFS betting as the attorney stated that it must be treated as illegal gambling since these companies were operating without a permit. DFS companies insist that the games they offer do not revolve around luck or chance but are based purely on skill and hence cannot be considered as online gambling.
Nevada knows that if the DFS industry is regulated then it would gain a significant amount of revenue in gaming taxes. New York and a number of other states are also looking to follow a similar stance and it will be up to the court to decide if the DFS industry has to be regulated.
The attorney general filed a petition which said
The two dominant DFS operators, FanDuel and DraftKings, offer rapid-fire contests in which players can bet on the performance of a ‘lineup’ of real athletes on a given day, weekend, or week. The contests are streamlined for instant gratification, letting bettors risk up to $10,600 per wager and enter contests for a chance to win jackpots upwards of $1 million. The DFS operators themselves profit from every bet, taking a ‘rake’ or a ‘vig’ from all wagering on their sites.
DraftKings which is expected to have as many as 375,000 registered players from New York was not happy with the attorney general’s petition and stated that Schneiderman does not fully understand the DFS industry and has misinterpreted and misapplied the law. Both DraftKings and FanDuel had requested a temporary restraining order on Schneiderman’s petition but the state judge denied their request and ordered both companies to appear in court on the 25th of November to decide on a further course of action.
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