DraftKings and FanDuel sue to keep operating in Illinois
Fantasy sports companies including Boston’s DraftKings Inc. went to court in Illinois on Thursday in a bid to keep operating there after the state’s attorney general said their cash-prize games were illegal.
In a letter Wednesday, Attorney General Lisa Madigan asked DraftKings and New York’s FanDuel Inc. to block Illinois players in light of her decision that they were violating the state’s statutory ban on gambling.
It was the latest setback for the two biggest daily fantasy sports companies, which have already pulled out of Nevada after regulators there said they would need licenses to stay open, and are fighting efforts by New York’s attorney general to shut them down.
But DraftKings and FanDuel vowed to continue accepting entries from Illinois, and sued Thursday in separate county courts for the right to do so.
“We filed suit... to ask a court to declare daily fantasy sports legal under Illinois law, and to do so on an expedited basis, so that the hundreds of thousands of Illinois fans who have played DFS openly and honestly for nearly a decade will know they can continue to enjoy the fantasy sports games they love,” Randy Mastro, an attorney for DraftKings, said in a statement.
FanDuel issued a similar statement, adding, “we intend to continue offering play in Illinois until there has been a decision from a court on our lawsuit.” It filed its suit in conjunction Head2Head Sports LLC, a longtime season-long fantasy contest operator.
Season-long fantasy leagues are far more popular and generally less controversial than the high-frequency, high-stakes daily fantasy sports contests. By filing alongside Head2Head, FanDuel may be trying to force Madigan to argue that season-long leagues are also illegal, putting her at odds with legions of sports fans.
Both firms argued the contests they offer are legal games of skill, not chance, under Illinois law, with participants competing on their ability to use statistics and analysis to pick a roster of athletes that will outperform rosters assembled by other players.
DraftKings’ lawsuit said Madigan’s decision “misinterprets” Illinois law, improperly circumvents the legislative process, and masquerades as a “benign rumination” when in fact it has the potential to destroy the daily fantasy sports industry. Madigan, the company said, “fundamentally” misunderstands its contests.
“The Attorney General’s opinion, if left unchecked, will not only force DraftKings to exit the State, but also have a ripple effect, irreparably harming DraftKings’ operations through the nation and causing it to lose customer goodwill that can never be restored,” the company’s attorneys wrote. The company added that Illinois residents constitute nearly 10 percent of all its customers, and have paid more than $92 million in entry fees in 2015.
The filings against Madigan by DraftKings and FanDuel echo papers the companies submitted last month in New York, where Attorney General Eric Schneiderman ruled their contests constituted illegal gambling and ordered them to stop accepting entries from that state. The same high-powered attorneys are representing the companies in both states.
“They have to do this,” said Daniel L. Wallach, a sports and gambling lawyer at Becker & Poliakoff in Fort Lauderdale, Fla. “This is a fight for their survival. It is the ultimate bet-the-company litigation.”
Earlier Thursday, a spokeswoman for Madigan said the attorney general’s opinion spoke for itself and that she would have no further comment.
Wednesday, Madigan’s office said the companies could resume offering their contests in the state only if Illinois lawmakers agree to specifically exempt fantasy sports from the state’s antigambling laws. A measure that would explicitly legalize the games is pending in the state legislature.
In daily fantasy sports, contestants pick rosters of real-world athletes from different teams and are awarded points based on how those athletes perform in games. Players whose rosters earn the most points win cash prizes worth up to $1 million.
Illinois is the fourth-largest source of paying fantasy sports players in the country, according to research from analyst firm Eilers Research LLC. Illinois’ estimated 200,000 paying customers contribute about 6 percent of industry revenues, Eilers found.
Odie Hoover, a frequent daily fantasy sports player from Chicago, said Madigan’s ruling “was like getting punched in the gut.”
“It’s a slow execution. They’re killing this industry by taking it out state-by-state,” he said. “You just become a pawn in their game. None of these people care about daily fantasy sports, they haven’t played it. They’re just trying to score political points.”
Massachusetts Attorney General Maura Healey has not moved to shut down fantasy sports operators, saying that their activities are not explicitly banned under state law.
Instead, Healey has proposed a long list of consumer protection regulations, including restrictions on the companies’ advertising and beginner-only games that keep new players sequestered from highly experienced competition.
“I would put my money on the industry, but it’s going to be a long process. It could be a year or more before these court proceedings reach any kind of finality,” attorney Wallach said. “In the short term, the goal is to avoid any preliminary injunctions or any extraordinary measures to block their ability to offer contests.”