NY Attorney General Shuts Down Daily Fantasy Sports Sites, Because Grandstanding
from the here-we-go-again dept
We've talked a lot in the past about how various state Attorneys General love to grandstand in ways where they get headlines that they can hold up to claim they're "protecting the public from evil corporations," even when there's no legal basis for it. Usually it's for the sake of the headlines, because most state Attorneys General use their office as a stepping stone for Governor or Senator. In the last few years, the "pick on high profile company x" plan has involved a lot of internet companies -- because they're in the news so much. And, now, New York's Attorney General Eric Schneiderman has declared daily fantasy sports sites like FanDuel and Draft Kings to be illegal and ordered them to stop accepting users in NY.As you probably know, daily fantasy sports sites (specifically those two) have exploded in popularity in the last year or so, mostly based on something of a loophole in anti-online gambling laws in the US. When those laws were passed, at the demands of the casino business (and bizarrely attached to a bill about protecting our ports), there was an exception for "fantasy sports." At the time, of course, this meant fantasy sports leagues where you joined for the full season, or at least something along those lines. Then Fan Duel (which started out in Scotland as a prediction market for betting on the news) realized that it could make a sort of "daily" fantasy sports league that was legal under these rules, and Draft Kings followed a couple years later. With their explosion in popularity, it's no surprise that they'd start receiving regulatory scrutiny. Indeed, Congress and the Justice Department have both kicked off investigations of these sites in the past couple of months.
It wouldn't surprise me at all to find that both sites will soon face much stricter regulatory control. That's the nature of the game, especially when it involves something that, if not "gambling" certainly feels like gambling to many policymakers, and the supporters of moral panics. Of course, rushing in to regulate will almost certainly cause problems, blocking off potential innovations in this field that could be much better for all involved.
And thus, NY's Eric Schneiderman enters the fray, reinforcing his reputation as someone willing to attack internet platforms that most users love, just because of a few small incidents of potential abuse. In this case, he's basically cut off these two platforms without any sort of court ruling.
"It is clear that DraftKings and FanDuel are the leaders of a massive, multibillion-dollar scheme intended to evade the law and fleece sports fans across the country," Mr. Schneiderman said, adding, "Today we have sent a clear message: not in New York, and not on my watch."I recognize that some people can have serious problems with gambling that can create problems in their lives -- but many more are able to enjoy gambling for what it is. And it's kind of bizarre for Eric Schneiderman to declare "fantasy sports" gambling when he represents the state where Wall Street exists -- which involves significantly more "gambling" than anything coming out of two internet companies that many people seem to like using. People aren't being "fleeced" when they willingly participate in one of these daily fantasy sports sites. If there are -- as Schneiderman suggests -- misleading ads about the likelihood of winning or the amounts people can win, take issue with that, rather than shutting down the whole thing.
In the meantime, doing a big grandstanding rush job to shut these sites down to get all the headlines, without the benefit of a careful review and thoughtful understanding of the issues at play just seems like Schneiderman, once again, reminding innovative startups that New York is not welcoming for such innovation.
Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.
Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.
While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.
–The Techdirt Team
Filed Under: daily fantasy sports, eric schneiderman, gambling, innovation, new york, regulations, tech
Companies: draftkings, fanduel
Reader Comments
Subscribe: RSS
View by: Time | Thread
They brought this on themselves with insider trading
So no sympathy for these guys, they brought this one on themselves.
[ link to this | view in chronology ]
Re: They brought this on themselves with insider trading
So there were a few incidents with these 2 websites, how many times have people been caught insider trading on wall street? More than what has happened with these websites.
I think the AG is wrong here and I am sure the courts will agree with the companies, the AG does not get to state what is law and what is not.
[ link to this | view in chronology ]
Re: Re: They brought this on themselves with insider trading
I focus on this seemingly pedantic point because I really think we need to divide the question between
A) Does, in fact, NY law prohibit FanDuel, etc.?
and
B) Regardless of whether NY law does, should it?
The (B) question is easy. Either you are in favor of gambling restrictions, or you aren't. But your answer to (B) doesn't change what the New York state and regulatory bodies actually say about it.
The (A) question is highly technical and requires us to get into the weeds of N.Y. gaming law. Before Schneiderman's office filed suit, they all did a bunch of research so that there was at least a reasonable legal argument that FanDuel, etc. were illegal under N.Y. law as it currently stands. Maybe the Court of Appeals will disagree, but without looking closely at what the actual prohibitions are in the law and regulatory codes, I have to believe that the AG's office thinks they have an argument with a reasonable chance of convincing the judges on the Court of Appeals.
And, of course, if the Court of Appeals so rules, whether or not we think it makes any sense whatsoever, it is the law. It might be bad law, but it is.
[ link to this | view in chronology ]
Re: Re: Re: They brought this on themselves with insider trading
My statement above is not for or against these sites or online gambling in general. I do not like gambling so I don't participate. Heck, I don't like many of our laws either.
[ link to this | view in chronology ]
Re: They brought this on themselves with insider trading
Legitimate gambling operations are strictly regulated and are audited to ensure that they adhere to the regulations. Casinos, for example, don't need to rig their slot machines because they deliver a fine ROI without it; and they don't want to rig them because the consequences of being caught doing so are heavy. No such regulation and auditing exists here; these DFS sites could be operating fairly...or they could be complete scams. I'm betting (heh) on the latter.
[ link to this | view in chronology ]
Re: Re: They brought this on themselves with insider trading
Most of this regulation is used as a barrier to entry against possible competitors.
[ link to this | view in chronology ]
Re: Re: They brought this on themselves with insider trading
Such protections don't exist online.
[ link to this | view in chronology ]
Re: Re: Re: They brought this on themselves with insider trading
That should be easier to do on a computer, including online. Every server process from ntp through packaging managers write logfiles. It'd be simple to put together a program that inhales multiple logs and sorts by datestamp connecting like records to reconstruct exactly what happened and when, perusable at leisure as long as the logs exist.
[ link to this | view in chronology ]
Re: They brought this on themselves with insider trading
If you don't have your lineup set before the games start, you can't play that game.
So are you talking about looking at the lineup of everyone else and using that information to set your lineup before the games begin?
If so, then you can just look at any fantasy sports related website and go with what the 'experts' recommend. There are hundreds or thousands of them to refer to.
Now, if they were using their OWN website, that's different. Or if they colluded with each other, then I can see an issue, but information, by itself , and after the fact has little value to a player.
[ link to this | view in chronology ]
Re: Re: They brought this on themselves with insider trading
They have access to information the public does not have - the definition of insider trading. Did you read the article he posted?
http://www.nytimes.com/2015/10/06/sports/fanduel-draftkings-fantasy-employees-bet-rivals.html ?_r=0
[ link to this | view in chronology ]
Re: Re: They brought this on themselves with insider trading
[ link to this | view in chronology ]
If a DA wanted to get up on their soapbox and challenge government corruption and regulatory capture, I'd support them 100%.
[ link to this | view in chronology ]
Re:
[ link to this | view in chronology ]
Re: Re:
Unless you have watched his show, you are speaking from ignorance. He uses it to spotlight corruption, injustice, and other social issues. For example:
- capital punishment
- net neutrality
- immigration
- income inequality
- prisons
- nuclear weapons
- student debt
- civil asset forfeiture
- judicial elections
- municipal violations
- government surveillance
- patents
- child labor
He's not just a comedian, and the show is not just for laughs.
[ link to this | view in chronology ]
Re: Re: Re:
[ link to this | view in chronology ]
Re: Re: Re: Re:
I never said he was unbiased.
So if you agree with his views, he is a genius.
I also didn't say anything about his views, or that he is a genius, or even that he is right. So congratulations, your entire post was a complete non sequitur.
[ link to this | view in chronology ]
Re: Re: Re: Re: Re:
[ link to this | view in chronology ]
Re: Re: Re: Re: Re: Re:
[ link to this | view in chronology ]
Re: Re: Re: Re: Re: Re: Re:
[ link to this | view in chronology ]
Re: Re: Re: Re: Re: Re: Re: Re:
The ones I'm familiar with are more focused on bringing attention to perhaps overlooked problems, rather than presenting solutions. Who do you have in mind when you mention comedians proposing solutions to societal ills?
[ link to this | view in chronology ]
Re: Re: Re: Re: Re: Re:
Argumentum ad hominem. Saying someone is a comedian does nothing to prove him wrong, so no, you have failed to prove anything at all.
[ link to this | view in chronology ]
Re: Re: Re: Re: Re: Re: Re:
[ link to this | view in chronology ]
Re: Re: Re: Re: Re: Re: Re: Re:
[ link to this | view in chronology ]
Re: Re: Re: Re: Re: Re: Re: Re:
As the other person mentioned, you do seem to be struggling with English. You're now claiming that I implied John Oliver is right (about what exactly I'm not sure) because he is a comedian. Can you explain to me what part of my post implied that, and how?
[ link to this | view in chronology ]
Re: Re: Re: Re: Re: Re: Re: Re: Re:
[ link to this | view in chronology ]
Re: Re: Re: Re: Re: Re: Re: Re: Re: Re:
I said it's stupid to ignore him because he is a comedian. If you want to ignore him because you have heard what he has to say and you think he's dumb or wrong or crazy, that's totally different.
[ link to this | view in chronology ]
(Looking forward to joining http://fantasy-pro-wrestling-teams.co.tv as soon as it starts paying off on bets.)
[ link to this | view in chronology ]
Horse Racing
In both cases, there can be a measure of skill involved, such as researching past performance, particularly with respect to key factors like surface conditions (wet track/wet playing field). However, with that skill comes a large dose of luck to determine exactly who winds up winning and losing, both in the real-world performance (for the horses and the athletes) and in the betting performance.
I don't think it is unreasonable to say that these sorts of fantasy sports should fall under the same regulatory umbrella as betting on horse racing. Whether that means that it is banned (only some states allow betting on horse racing AFAIK), regulated (for those states that allow it), or free-for-all (dumping all such regulation, anyone can bet on anything) is a separate debate.
[ link to this | view in chronology ]
Re: Horse Racing
I'd just like to point out everything there applies as well to the little NFL lottery cards you can buy in any corner store and gas station and supermarket. I know a guy who plays them. He seldom loses.
[ link to this | view in chronology ]
Re: Re: Horse Racing
[ link to this | view in chronology ]
Nevada strategy
[ link to this | view in chronology ]
Re: Nevada strategy
http://www.reviewjournal.com/business/casinos-gaming/draftkings-fanduel-block-nevadans-ac cess-daily-fantasy-sports-sites
[ link to this | view in chronology ]
Wall St versus Fantasy Sports Gambling
State regulation of anything "Internet" simply doesn't make sense -- any reasonably clever soul can set up a mail box connection and an internet connection pretty well in whatever state they like, and then there are the american indian reservations!
[ link to this | view in chronology ]
2. Profit.
[ link to this | view in chronology ]
[ link to this | view in chronology ]
Why would blocking off "potential innovations" in the field of illegal online gambling be a problem? Not everything innovative is automatically good.
Remember, there are two great fools. One says "this is old, therefore it is good," and the other says "this is new, therefore it is better."
[ link to this | view in chronology ]
Re:
I think that daily fantasy sports has the potential for abuse, from the teams, players, and officials who may be motivated to screw around with the results of a single event in a longer season for profit. With no real tracking or regulation, it would be very easy for the systems to be "gamed". Not saying it happens, but the potential is there.
Where there is a lot of money on the table, there is almost always someone trying to figure out how to get more of it, better so if they can do it without being easily traced down.
[ link to this | view in chronology ]
Re: Re:
And once again you're full of shit.
[ link to this | view in chronology ]
Re: Re: Re:
Next time don't log in, you give yourself away.
[ link to this | view in chronology ]
Re: Re: Re: Re:
[ link to this | view in chronology ]
Re: Re:
This. One of things that I've learned from decades of security practice is that almost nobody even thinks about defending their operation from insider attack. And out of the few people that do, almost nobody does it effectively.
There's should be no doubt in anyone's mind that any number of people inside and outside these gambling operations are gaming their systems. Of course they are: it's easy, it's unlikely to be detected, and it's immensely profitable. I wouldn't even be surprised if these operations are fully aware of it -- but choosing to remain silent, because the PR hit they'd take by disclosure would be much worse than just losing a few million here and there.
I also wouldn't be surprised if the operations were designed to facilitate that -- because one of the best ways to siphon cash out of your own operation is to make it look like someone else is doing it by exploiting a security hole. Plausible deniability, you know, very useful.
[ link to this | view in chronology ]
Re:
[ link to this | view in chronology ]
Re:
[ link to this | view in chronology ]
[ link to this | view in chronology ]
Need to see statute before judging
If the argument here is that sports betting shouldn't be regulated, I don't have much of an argument with that. But the argument that commercial sports betting FanDuel/Draft Kings style isn't regulated depends on what the statute says, and I strongly suspect in N.Y. it's a too-cute reading of the law.
I'm not spending my day on clumsy legislative search engines, but a brief search of the NY State official code seems to say N.Y. Racing, Pari-Mutuel Wagering and Breeding Law 1367 is the appropriate code. As I read it, the law basically bans sports betting unless (A) federal law changes, or (B) N.Y. state passes appropriate regulations.
If this is the law, I think Schneiderman's right from the point of "what the law says" (which should always be considered separately from "what the law should be in a perfect world"). There isn't really an exception for much of anything sports betting-wise in N.Y., which makes sense as N.Y. loves to regulate things.
If I'm wrong, I'd love to know which is the actual state law at issue so we can talk intelligently about what the "fantasy sports" exception actually is in N.Y. and why FanDuel, etc. are in it.
[ link to this | view in chronology ]
Not an "order" and not "without any court ruling"
As I read the letter linked from the NY Times article (http://www.nytimes.com/interactive/2015/11/10/sports/document-final-nyag-fanduel-letter-11-10-2015- signed.html), Schneiderman sent the two companies a letter demanding that they cease and desist, and giving pre-litigation notice of an intent to file a lawsuit. Maybe it is more intimidating to get such a letter from the Attorney General of a state than from Marty Singer, but it is no more an "order" than a letter from Singer or any other of the players in the cease-and-desist letter field whom we all love to detest.
And of course it is without a court order, but Schneiderman is threatening to go to court. The court would then decide whether to issue an order. What am I missing?
[ link to this | view in chronology ]
Commerce Clause
[ link to this | view in chronology ]
Re: Commerce Clause
You might be thinking of the Supremacy Clause, if something in the federal sports betting laws preempted state law in this matter, but that's not the case with gambling at current -- both states and the federal government get to criminalize it to whatever extent they desire.
[ link to this | view in chronology ]
If it quacks like a duck
In Fantasy Football, you use your skill choosing players, and hope that they don't drop a couple of passes, or get stopped charging through the pack at the two-yard line. It's still ultimately a game of chance at the end of the day.
If they changed this back to a payoff at the end of the season, they'd be fine, from what I understand.
[ link to this | view in chronology ]
Isn't this tyranny?
[ link to this | view in chronology ]
Re: Isn't this tyranny?
[ link to this | view in chronology ]