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.

Filed Under: daily fantasy sports, eric schneiderman, gambling, innovation, new york, regulations, tech
Companies: draftkings, fanduel

With Tim Wu's Help, New York AG Launches Belated Investigation Into Whether ISPs Intentionally Slowed Netflix

from the looking-for-the-silver-bullet dept

A little more than a year ago you might recall that everybody's Netflix performance was in the toilet and the mega-ISPs were being blamed for it. In short, companies like Cogent, Level3 and Netflix all claimed large ISPs like Verizon had intentionally let their peering connections to some other networks saturate, contributing to sluggish Netflix streams. The goal, claimed Netflix and friends, was purportedly to make an extra buck by eliminating the long-standing practice of settlement-free peering, forcing Netflix to pay for direct interconnection to ISP networks if they wanted performance to return to normal.

Except here's the thing: once the FCC's net neutrality rules were passed, all of this double-dipping behavior magically and suddenly stopped. Ports mysteriously unclogged, new mutually-beneficial contracts were signed, Netflix streaming performance returned to normal, and the threat of a regulator actually doing its job now had everybody getting along famously. Our long, dark buffering Netflix nightmare appeared to be at an end.

So it's a little odd for New York Attorney General Eric Schneiderman to announce only just this week that he's launched an investigation into interconnection and streaming performance issues. Schneiderman recently hired net neutrality godfather and Columbia law professor Tim Wu as a temporary "senior lawyer and special adviser." It's now clear why. On behalf of the NY AG, Wu has sent letters sent to NYC incumbents Verizon, Cablevision and Time Warner Cable (pdf) demanding huge swaths of documents related to last mile performance and interconnection:

"This Office is concerned that, for reasons substantially within Verizon’s control, consumers may not be experiencing the speeds advertised. In particular, we are concerned that those paying for premium options, for various reasons mainly related to interconnection arrangements, may not be experiencing proportional increases in experienced speeds. Our concern is that the impact of technical and business decisions made at the point of interconnection between Verizon and other networks may affect end-to-end throughput. In this respect, we are specifically concerned about disruptions to the consumer experience caused by interconnection disputes, and also the possibility that interconnection arrangements may in some instances render irrelevant any benefit of paying for a “premium” option."

Here's the problem. While available evidence from MLAB (pdf) and a generation of bad behavior may certainly suggest companies like Verizon were up to no good, it's not yet possible to definitively prove it with the data we currently have. That data shows this congestion was tied to business policy and not network limitations, but how exactly do you prove Verizon didn't adequately upgrade key hardware to intentionally create congestion? It's unlikely a company as clever as Verizon or Comcast would have acknowledged the anti-competitive potential of such a decision in a memo or PowerPoint presentation.

Perhaps Wu thinks such a silver bullet exists and he can find it. And sure, such proof would certainly be helpful should the FCC's net neutrality rules be struck down in court early next year and it's left to other regulators to hold the mega ISPs to account for bad behavior. On the flip side, with Verizon not very popular in New York right now, this could just be a not-entirely uncharacteristic attempt by Schneiderman to see his name in very bright lights, with the AG coming to the public's rescue only after the threat has already passed.

Filed Under: broadband, congestion, eric schneiderman, interconnection, new york, tim wu
Companies: at&t, netflix, time warner cable, verizon

NY Attorney General Proposes Not Terrible Cybersecurity Legislation

from the did-he-not-get-the-memo? dept

The state of New York wants to get in on all the cybersecurity fun the kids legislators and intelligence officials are talking about these days. New York Attorney General Eric T. Schneiderman has announced his plan to introduce cybersecurity legislation this year, putting the state in the position to regulate data security and its citizens' privacy.

Most legislation that includes the word "cyber" is nothing more than an excuse to give the government a larger piece of the action -- generally by redefining the term "information sharing" to mean a one-way street of data collection running from private companies (and their customers) to various law enforcement and security agencies.

Schneiderman's proposal seems to be more skewed towards actually increasing protections of companies and customers, rather than simply codifying additional government access. But before we start passing around high fives and popping champagne corks, it must be noted that not a single word of this has been put to paper yet (excluding the press release). At this point, it's just a proposal for legislation. There's no first draft to read and no indication what its interplay (amendments, etc.) with existing laws will entail.

That being said, most of what's delivered in Schneiderman's statement is mostly reasonable. Most of what's being asked for should have already been in place (including additional restrictions on the sharing of medical data). Many companies (coughSONYcough) seem to treat their customers' personal data as an afterthought -- something that only deserves attention after it's been Pastebinned for the world to see.

Expand Definition of Private Information- New York legislators should expand the definition of “private information” to include both the combination of an email address and password, and an email address in combination with a security question and answer, as California already has done. Additionally, the definition of private information should include medical information, including biometric information, and health insurance information.

Legislate Reasonable Data Security Requirement- All entities that collect and/or store private information should be required to have reasonable security measures to protect said information. These measures should include:

Administrative safeguards to assess risks, train employees and maintain safeguards.

Technical safeguards to (i) identify risks in their respective network, software, and information processing, (ii) detect, prevent and respond to attacks and (iii) regularly test and monitor systems controls and procedures.

Physical safeguards to have special disposal procedures, detection and response to intrusions, and protect the physical areas where information is stored.

Certification- Entities that obtain independent third-party audits and certifications annually showing compliance with New York’s reasonable data security requirements should receive for use in litigation a rebuttable presumption of having reasonable data security.

Legislate a Safe Harbor to Provide an Incentive for a Heightened Level of Data Security– New York needs to incentive businesses to implement the most robust data security. To do so, New York should offer a safe harbor if a company adopts a heightened form of security. To comply, entities would be required to categorize their information systems based on the risk a data breach imposes on the information stored. Once information systems are categorized, a data security plan based on a multitude of factors would be implemented and followed. Once this standard is met, the entity would be required to attain a certification and, upon doing so, would be granted the benefit of a safe harbor that could include an elimination of liability altogether.

Overall, not terrible, with a couple of caveats. One: the government's ability to protect itself from cyberattacks and other hacking ranges from less-than-adequate to abysmal. Considering its lack of self-awareness, it seems presumptive to put itself in the position of setting standards for data security. Sure, it could bring in actual experts in the field to craft these, but once legislators have had their say, what's been recommended may only bear the faintest resemblance to what's actually implemented.

Two: while the proposal helpfully expands the definition of "private information," it fails to provide specifics about who can or can't access this information. Any company could route around these restrictions with some fine print in its Terms of Service. And there's nothing forbidding the acquisition of medical, biometric and insurance data by the state itself. In fact -- and here's where we head into the "fairly decent BUT" section" -- the proposal lays the groundwork for one-way information sharing in the final paragraph.

Protection for Sharing Forensic Data- Finally, in the event of a data breach, New York should incentivize companies to share forensic reports with law enforcement officials. One way to accomplish this would be to make sure that the disclosure of a forensic report to a relevant law enforcement agency for the purposes of investigating those responsible for a data breach does not affect any privilege or protection. This would allow companies to feel comfortable with the free sharing of information while giving authorities a better chance at catching those responsible.

This is more sensible than other proposals as it looks to limit sharing of data to forensic data only. Then again, this is a proposal and, while all intentions are pure, it's a long way from a finished product. When the bill finally hits the legislative floor, it's very likely that this restrictive sharing will be loosened. Considering the panic that surrounds all things cyber-related -- especially once some enterprising do-gooder tosses the word "cyberterrorism" into the mix -- it's going to take a very dedicated and obstinate person to shepherd this through with most of these protections still intact.

And someone's still going to need to sell this additional layer of regulation to the companies it will affect -- many of whom have some pull in the upper reaches of the government. They're not exactly going to welcome the additional expense of implementing solid data security, even if they should have been on top of this since day one. The litigation safe harbor should make the pitch a bit more appealing, but again, it will take someone dedicated and tenacious to ensure the requirements aren't watered down into uselessness on its way to the governor's desk.

Filed Under: cybersecurity, eric schneiderman, new york, security

Airbnb Under Pressure, Agrees To Hand Over Data To NY's Attorney General

from the makes-ny-less-interesting-to-visit dept

As we've discussed a few times, NY's Attorney General, Eric Schneiderman, has been trying to go on a fishing expedition through Airbnb's records, looking for what he calls "illegal hotels." Of course, he's more or less admitted that he's doing this to protect big NYC hotels from being disrupted. Last week, Airbnb actually won in court, quashing Schneiderman's subpoena, though Schniederman just turned around and issued a new subpoena to deal with the deficiencies of the first one.

Recognizing that it was going to run into issues eventually, Airbnb has worked out a "settlement" with Schneiderman, in which it will provide anonymous data, but if Schneiderman finds information that he thinks indicates an "illegal hotel" he can go back to the company to get identifying information. Airbnb says it hopes that Schneiderman is really just focused on true large-scale abusers, many of which it has already removed from the system itself:

The Attorney General's Office will have one year to review the anonymized data and receive information from us about individual hosts who may be subject to further investigation. We believe the Attorney General's Office is focused on large corporate property managers and hosts who take apartments off the market and disrupt communities. We have already removed more than 2,000 listings in New York and believe that many of the hosts the Attorney General is concerned about are no longer a part of Airbnb.

As I've mentioned in the past, I've used Airbnb to find places to stay in NYC a few times now, and it's been an absolutely wonderful experience, significantly better and more convenient than staying in Manhattan hotels. The accommodations, location and service were all significantly better. At least two of the hosts whose places I've stayed at own multiple apartments and rent them out via Airbnb, and it seems ridiculous that they might be shut down because of this. Yes, there are specific "hotel" regulations in NYC, but it seems silly to apply most of them to these kinds of small businesses, where the platform and competition do a great job of keeping them honest. The hosts always seemed to go out of their way to make sure that staying at their apartments was a great experience worth coming back again in the future. Yes, it's possible that some people are somehow abusing the system, but it seems likely that plenty of small time entrepreneurs are going to get swept up in this effort to protect big hotels from disruption.

Filed Under: anonymous data, apartment rentals, disruption, eric schneiderman, illegal hotels, ny, nyc
Companies: airbnb

NY Attorney General Admits He's Targeting AirBnB To Protect The Big NY Hotels That Are Being Disrupted

from the protectionism-against-disruption dept

Over and over again in talking about innovative disruption, we talk about how incumbents turn to regulators and politicians to kill off that disruption. Usually, they don't admit it directly -- preferring to couch their language in talk about "safety" and protecting consumers -- even though many of these disruptive systems actually appear to be better for consumers. However, sometimes politicians are willing to just flat out admit that they're trying to protect incumbents from innovative upstarts. And that's what's now happened with NY's Attorney General, Eric Schneiderman.

Last fall, we wrote about how Schneiderman was demanding information on 15,000 AirBnB users in NY, claiming that he was hunting down "long-term illegal rentals." In a NY Times article highlighting how AirBnB users (from both sides of the market) are pushing back against Schneiderman's crusade against AirBnB, Schneiderman finally admits what everyone has known all along. He's doing this to protect the big NY hotels from getting disrupted. And yes, he sandwiches the claim between claims of "just enforcing the law" and "protecting" people, but the message is pretty clear. This is about protecting the incumbent hotels:

First he said that “we have a well-regulated and extraordinarily successful hotel sector” that is “one of our finest industries and contributes a lot to the economy.” Then, a bit later, he added, “We’re just looking in New York to enforce New York law, and also, frankly, to protect our hospitality industry that goes through a lot of trouble to have great hotels, to protect tourists, to provide services, and to protect the people in our residential housing.”

It is true that NY law prevents short-term apartment rentals (basically anything less than 30 days). But to pretend this is about protecting the public is just ridiculous. I've stayed at many hotels in NY and a few AirBnB places -- including some that likely fit Schneiderman's definition of an "illegal hotel." And, without question, the AirBnB experience every single time has been vastly superior to the hotel experience. It's not even close. Assuming Schneiderman allows it to exist, I'll continue to make use of AirBnB, and it's not just because it's usually cheaper (though it often is), but the overall experience is phenomenal. I get to stay in unique and interesting places in unique and interesting neighborhoods -- usually much more convenient for my travel needs. One AirBnB host I met owns three apartments, living in one (renting out the spare bedroom), but mostly focusing on full time renting out the other two. The service was great -- and much more personalized than any hotel I've ever stayed in.

The last thing I want is for NY's Attorney General to "protect me" from that.

Filed Under: disruption, eric schneiderman, hospitality, innovation, new york, nyc, protection
Companies: airbnb

New York's Attorney General Shouldn't Be Able To Go On A Fishing Expedition Through AirBnB Hosts

from the that's-not-how-the-law-works dept

In an odd bit of timing, I happen to be writing this post in a nice studio apartment in Midtown Manhattan, which I was able to rent via AirBnB, which has turned out to be a great find. I'm in NYC for a conference and some meetings, and while the conference offered a "special rate" on a hotel, this better located, much nicer, full studio apartment was more than $100 cheaper per night. The owner is a really nice guy who's able to make some money renting out this apartment -- and he's legitimately worried that NY is going to shut this down. And yet, as we noted last month, NY's grandstanding attorney general (is there any other kind?), Eric Schneiderman, has demanded that AirBnB turn over information on every host in NY in an insane fishing trip. His office claims it's just looking for "bad" AirBnB users -- mainly those doing "long-term illegal rentals," but that shouldn't allow for a massive fishing trip into the activities of the 15,000 hosts in the state of NY.

The EFF and CDT have now filed an excellent brief arguing that Schneiderman has no right to this vast treasure trove of information.

"Indiscriminate subpoenas that seek the identity and other personal information of thousands of Internet users without specific justification are improper and should be quashed," EFF Senior Staff Attorney Matt Zimmerman said. "It is not enough for the state to speculate that some Airbnb users might have broken some law at some unknown point. An online service's users deserve to be protected from fishing expeditions like this one."

In the brief, the groups argue that this is a threat to plenty of people's privacy.

While Airbnb has opposed the subpoena, innocent third parties should not have to rely on a company to protect their private interests.... The Attorney General has not curtailed its request to what it is legitimately entitled to receive, and this type of unfettered dragnet collection of user records should be denied.

Hopefully, the court will quash this overbroad subpoena, and NY will make it clear that merely renting out your place doesn't subject you to random fishing expeditions for information from the state's attorney general.

Filed Under: eric schneiderman, fishing expedition, ny
Companies: airbnb, cdt, eff

NY's Attorney General Demands All Data On NYC AirBNB Rentals

from the chilling-effects dept

What is it with states attorneys general and their attacks on innovation? The latest news is that NY's AG, Eric Schneiderman, is demanding data from AirBnB on all 15,000 users in NYC who have rented out their place. This comes after a ruling back in May saying that an apartment owner renting out his place was guilty of running an illegal hotel (that was just overturned). Of course, the very day that original ruling happened, I'd been trying to rent a place in NYC on AirBnB -- and I even had a guy who had agreed to rent me the place pull back, saying that because of the legal issues he was removing his apartment from the site. I'm about to go to NYC again, and have another AirBnB place lined up -- but am now nervous that this one, too, will disappear.

The NY AG's office claims that they're only going after a small number of "bad" AirBnB users, mainly "landlords doing long-term illegal rentals," but if that's the case, why does it need information on 15,000 users. If anything, that's going to create massive chilling effects. Services like AirBnB provide tremendous amount of value on both sides of the equation -- homeowners are able to make extra cash (sometimes significant amounts) while travelers are able to rent out nice places at lower rates than hotels. It's a good deal that's pretty efficient across the board. The NY AG's office claims that this leaves out neighbors who may be impacted, but it seems like there are much better ways to deal with neighbor problems than having to go trolling through all of AirBnB's records.

Filed Under: attorney general, eric schneiderman, landlords, ny, nyc, rentals
Companies: airbnb