New law allows DraftKings, fantasy sports to return to N.Y.

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Bear Duker, a marketing manager for strategic partnerships at DraftKings, works at his computer at the company headquarters in Boston.Stephan Savoia

New York Governor Andrew Cuomo on Wednesday signed a bill legalizing daily fantasy sports contests for cash in his state, clearing the way for Boston-based DraftKings Inc. to reenter one of its most lucrative markets just before the start of football season.

The law, supported by the industry and passed by the New York Assembly in June, establishes consumer protections, formal regulation, and a tax on the games that Cuomo expects will generate $4 million for New York's education system.

"Daily fantasy sports have proven to be popular in New York, but until now have operated with no supervision and no protections for players," Cuomo said in a statement. "This legislation strikes the right balance that allows this activity to continue with oversight from state regulators, new consumer protections, and more funding for education."

Last November, New York Attorney General Eric Schneiderman moved to shut down DraftKings and its New York-based rival, FanDuel Inc., arguing the contests were a form of illegal gambling.

Cuomo's signature largely ends that fight, as Schneiderman had previously agreed to drop his legal challenge of the games upon passage of such a law. Schneiderman will, however, be free to continue pursuing claims that the companies' ads misled consumers.

DraftKings and FanDuel said they expect to resume offering contests in New York soon by applying for a temporary license, and later, a more formal three-year operating permit.

Cuomo's timing was fortuitous for the companies, as they will now be able to accept entries from populous and football-loving New York in time for the start of the National Football League season in September.

David O. Klein, a lawyer who represents some smaller daily fantasy companies, said other states had been watching New York closely.

"I think it's going to be a domino effect throughout the country. I think other states will likely greenlight fantasy sports," Klein said.

Under the law, highly experienced players who could potentially take advantage of new users will be flagged within the online games, in which players wager on whose handpicked roster of athletes will perform better. The number of entries any one player can submit will also be restricted, and contests based on college or high school sports or horse racing are now banned.

Both FanDuel and DraftKings hailed Cuomo's approval of the new law.

"We are excited to have our Draft-Kings contests return to New York and bring the fun and excitement of DFS back to our fans," DraftKings said in a statement.