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DraftKings hits back in appealing for N.Y. business

Scott Olson

DraftKings Inc. Monday asked a New York state appeals court to “preserve the status quo” by allowing the company to continue offering its daily fantasy sports contests in that state heading into the high-stakes NFL playoff season.

In new filings to a court weighing whether to shut the company’s operations in New York, DraftKings accused the state’s attorney general, Eric Schneiderman, of a “rush to judgement” when he sought an emergency order to have fantasy sports games banned immediately as illegal gambling.

A lower court in Manhattan had granted Schneiderman’s request in December, but that order was suspended after the companies appealed.

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The shutdown order, DraftKings said in its new filing, would deprive “375,000 New York customers of the contests they love and have been enjoying for years. It would cause DraftKings to lose millions of dollars in revenue while irreparably harming its relationships with investors and business partners that have invested hundreds of millions of dollars over the past four years.”

While the sides fight it out in court, DraftKings and FanDuel have continued offering fantasy sports games for cash prizes in New York.

One such contest, DraftKings’ “Millionaire Maker” for this weekend’s NFL playoff round, is offering $3.5 million in total payouts including a $1 million top prize. The New York market is lucrative, accounting for about $100 million in player entry fees to DraftKings alone last year.

The new filing by DraftKings featured sharp words aimed at Schneiderman. The company accused the attorney general’s office of overreacting after “years of that office’s silent indifference,” resorting to “smear tactics and speculation” by declaring that daily fantasy sports were a threat to the public.

“The attorney general’s armchair sociology would not pass muster on a daytime talk show,” DraftKings said in its filing. Fantasy sports games “have been offered openly, honestly, and permissibly in New York for nearly a decade; and if the NYAG had actual evidence that they caused public harm, he would have identified it in his brief. There is none.”

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In filings submitted in December, Schneiderman said daily fantasy games have “caused serious harm” to people addicted to gambling, who have found the games “irresistible” because they are so widely available.

The prosecutor is also asking the trial court to fine the fantasy sports companies and order them to reimburse entry fees to New York players. He also said the companies don’t deserve breathing room to keep running their businesses, which he called “nothing more than a rebranded form of sports betting.”

Daily fantasy players, Schneiderman wrote, “may exercise some skill in researching and predicting athletic performances, but that ‘skill’ is no different from the research that a sports bettor or horse-racing gambler does to make better-informed guesses.”

He also said DraftKings and FanDuel wouldn’t face dire business consequences if forced to shut down in New York. FanDuel did so voluntarily for several weeks in an earlier phase of the court case, “without suffering any serious harm to its overall business,” Schneiderman wrote.

Schneiderman contends that daily fantasy sports contests for cash violate that state’s gambling laws, and in early December persuaded a Manhattan judge to order DraftKings and FanDuel to block New Yorkers from playing. That order was immediately stayed by an appellate judge and will now be reviewed by a larger appeals court.

In its filing Monday, DraftKings also said the lower court judge, Manuel Mendez, made a series of legal errors when granting Schneiderman’s request for an emergency shutdown.

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The appellate judges could rule on the matter within a month.

The New York case also has roiled DraftKings’s sensitive relationship with a key business partner: Last week, payment processor Vantiv Inc. asked a New York court for permission to continue handling entry fees and prize payouts for New Yorkers while the case is argued.

DraftKings has faced fewer regulatory headaches in Massachusetts, where Attorney General Maura Healey has proposed a long list of consumer-protection regulations while saying no law explicitly bans fantasy sports contests as illegal gambling.


Curt Woodward can be reached at curt.woodward@globe.com. Follow him on Twitter @curtwoodward.