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Long IslandPolitics

Court stays injunction blocking DraftKings, FanDuel from doing business in New York

Fans of online fantasy sports and employees of

Fans of online fantasy sports and employees of sports gaming companies gather in front of Attorney General Eric T. Schneiderman's Manhattan office on Friday, Nov. 13, 2015. Credit: Craig Ruttle

ALBANY — Daily fantasy sports companies can continue to do business in New York after a state court on Friday temporarily blocked an earlier ruling that could have shut them down.

Friday morning, Supreme Court Justice Manuel Mendez issued an injunction, sought by Attorney General Eric T. Schneiderman, suspending the operations of DraftKings and FanDuel — the two largest daily fantasy sports companies — in the state. Schneiderman, a Democrat, has filed a civil lawsuit to shut down the companies, calling them illegal gambling operations.

But late Friday afternoon, the Appellate Division of state Supreme Court granted an immediate stay of the injunction.

“This immediate stay was granted, so we will remain fully operational in New York,” a DraftKings spokesman said in an email.

FanDuel, which had shuttered New York operations amid the legal fight, didn’t immediately comment about the stay.

A Schneiderman aide said the stay is for one month and that the attorney general will seek to quash it.

“We look forward to demonstrating to the Appellate Division why they should uphold today’s decision to grant a preliminary injunction barring DraftKings and FanDuel from continuing their illegal gambling operations in New York,” Schneiderman spokesman Damien LaVera said in an email.

New York-based FanDuel and Boston-based DraftKings control about 95 percent of the daily fantasy sports market, officials have said. The companies claim they offer games of skill, not chance, and are, therefore, legal. New York has more daily fantasy sports players than any other state, with 1.1 million, according to Eilers Research.

In his decision, Mendez warned that “granting or denial of a preliminary injunction does not constitute a determination of the ultimate issues.”

But a New York law professor said Mendez’s ruling indicates FanDuel and DraftKings are in big trouble in this case.

“There is a chance FanDuel can still succeed, but that chance is substantially less than it was before,” Nellie Drew, a sports law professor at the University of Buffalo, said in an email. “The injunction doesn’t mean it is over for FanDuel, but it certainly bodes very well for the Attorney General. I would say, more likely than not, that unless there is something in FanDuel’s and DraftKings’ arsenal that we have yet to see, they have a big worry.”

FanDuel called Mendez’s decision “wrong,” assured a swift appeal and predicted that it would “ultimately be successful” in the case.

“The court specifically noted that this was not a final determination of the issue and that discovery would be needed to fully resolve the legal question, which we think should be decided in our favor when all of the evidence is in,” the company said in a statement.

The companies had argued that shutting them down before the lawsuit was resolved would devastate their businesses. Mendez disagreed and said that had to be balanced with other concerns.

“The balancing of equities are in favor of the NYAG (Schneiderman) and the state of New York due to their interest in protecting the public, particularly those with gambling addictions,” Mendez wrote.