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As scrutiny rises, DraftKings under review across US

Devlin D’Zmura, a tending news manager at DraftKings, worked on his laptop at the company’s offices in Boston last September.
Devlin D’Zmura, a tending news manager at DraftKings, worked on his laptop at the company’s offices in Boston last September.Stephan Savoia/Associated Press

For embattled daily fantasy sports companies DraftKings Inc. and FanDuel Inc., it's getting harder to tell when and where the next shoe will drop.

This week, it was Illinois, where Attorney General Lisa Madigan ruled on Wednesday that the companies controversial contests for cash are a form of illegal gambling under that state's laws and requested that they stop accepting entries from Illinois.

The decision, which came just before the Christmas holiday, was a surprise, as Illinois gambling regulators had backed off earlier threats against daily fantasy sports companies and the state legislature had been advancing a bill that would make the contests explicitly legal.

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It followed a similar determination by New York Attorney General Eric Schneiderman in November, and both companies withdrew from Nevada in October after gambling regulators there said the contests were a form of gambling that required licensure. The firms are also being investigated by federal prosecutors in Massachusetts, New York, and Florida.

To counter the threat, Boston-based Draft-Kings and FanDuel of New York have launched a joint lobbying effort in numerous state capitals, and each has hired a team of high-powered attorneys. But Madigan's opinion only underscored that the companies are facing a complex, unpredictable, multi-front battle for survival — in other words, a business and legal nightmare.

What's next? Here's a look at the other states where daily fantasy sports are facing heat:

PENNSYLVANIA

A spokesman for Attorney General Kathleen Kane has said that daily fantasy sports are "under review," without specifying whether she would seek to regulate or shut down the contests. In the legislature, a tangle of bills suggest various approaches to controlling daily fantasy sports, including one that would require the games be played through websites managed by licensed casinos. Another would direct the state Gaming Control Board to study daily fantasy sports and report back to lawmakers. While it's not clear yet which approach will prevail, numerous lawmakers and officials are engaged in the debate, and it seems more likely than not that the state will take some action on daily fantasy sports in 2016.

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CALIFORNIA

There has been little talk of an outright ban on daily fantasy sports in California. But several reports suggest that Attorney General Kamala Harris is at least looking at the contests, if not formally investigating them. Lawmakers appear split on the issue: One, Assemblymember Marc Levine, wrote to Harris demanding that she order daily fantasy companies to "cease and desist immediately because they're operating illegally in the state of California," according to the Orange County Register. Another, Assemblymember Adam Gray, has introduced legislation that would introduce consumer protection measures and give California's gaming commission power to regulate the industry.

SOUTH DAKOTA

Daily fantasy companies may just avoid disaster in South Dakota. Earlier this month, Attorney General Marty Jackley said that in the absence of a law that explicitly bans their contests, he would not seek criminal charges against companies such as DraftKings and FanDuel — a stance similar to that of Massachusetts Attorney General Maura Healey. The market is small compared to the sports-mad states of New York and Illinois. But that doesn't mean daily fantasy is in the clear either. Jackley said: "I will continue to consider other alternatives including potential civil remedies and national attorneys general joint action aimed at protecting the intent of our constitutional and statutory provisions."

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TEXAS

Texas gambling laws are similar to the Illinois statutes Madigan cited in ruling that daily fantasy sports are illegal. Adding to the unease for DraftKings and FanDuel: A state lawmaker last month asked Attorney General Ken Paxton to evaluate the legality of daily fantasy sports under state law. A "grass-roots" group of fantasy fans propped up by the two companies recently launched an online petition aimed at Paxton, which, according to the Texas Tribune, did not amuse the attorney general. "A well-funded publicity campaign makes for good headlines. But the question in any attorney general opinion is how a court would rule on existing law," a Paxton spokesperson told the Tribune. "A publicity campaign cannot and should not influence that objective inquiry."

MARYLAND

A spokesman for Attorney General Brian Frosh told the Globe this week Frosh was analyzing whether daily fantasy sports are legal after receiving a request from the president of the state senate. Included in Frosh's review is the impact of a 2012 law that made traditional season-long fantasy leagues legal and a constitutional amendment that says any expansion of commercial gaming must be put to a statewide vote. However, the spokesman said, Frosh's opinion will essentially be an "advice letter" to lawmakers, not a binding ruling.

FLORIDA

Good news for daily fantasy companies: Attorney General Pam Bondi is staying away from the controversy around their contests. Bad news: the US attorney in Tampa, Lee Bentley, is wading in instead. Asked whether Bondi's office would be looking into legality of daily fantasy, amid reports that Lee had convened a grand jury to investigate possible violations of federal anti-gambling law, a spokesman for Bondi said: "Our office has engaged in extensive discussions with the US attorney's office and we both agree this matter should be handled federally."

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Dan Adams can be reached at dadams@globe.com. Follow him on Twitter @DanielAdams86.