DraftKings, FanDuel file suit to prevent NY shutdown (Updated)

DraftKings and FanDuel struck back Friday, filing lawsuits against state Attorney General Eric T. Schneiderman to prevent him from shutting down the fantasy sports business in New York.

The companies, which control an estimated 95 percent of the fantasy sports market, asked a New York state court to nix a cease-and-desist letter issued by Schneiderman on Tuesday that sought to shut them down in New York. They also asked the court to summarily declare that fantasy sports don't constitute "gambling" or "bookmaking" as defined by state law.

Boston-based DraftKings claimed the attorney general lacked legal authority and had engaged in a "shocking overreach."

"Today, we have taken decisive legal action to prevent a unilateral, misinformed and legally misguided attempt by the New York attorney general to act as 'judge, jury and executioner' for daily fantasy sports in New York," DraftKings said in a statement. "We are confident in our legal position and intend to continue to fight to preserve the right of the over 500,000 New York consumers to play the fantasy sports games they love."

New York-based FanDuel made similar claims. But it also said on its website that, given the legal challenge, it would stop taking new deposits from New York customers while allowing existing players to continue playing the game.

A Schneiderman aide countered that the two companies were engaged in "illegal sports betting" and said the attorney general would "take action to enforce state law," but did not provide specifics. Among other things, the attorney general could seek an injunction to immediately block the companies from taking bets from New Yorkers.

Schneiderman's action came one month after Nevada halted DraftKings and FanDuel from operating there. But more is at stake in the New York fight -- it has more fantasy sports players than any other state, according to Reuters.

Protesters at a rally in front of Schneiderman's Manhattan office Friday said they feared New York's action could have a domino effect.

"I feel like once New York does this, a lot of other state attorney generals will do the same," said George Harlamon, 29, a construction worker who traveled from Waterbury, Connecticut, to protest. A three-year player with FanDuel, he said he has cashed out several significant sums during that time, considers it a game of skill and doesn't want to see it taken away.

About 300 attended the rally -- but many admitted they were employees of one of the companies. They chanted "Let us play!" and carried signs reading "Schneiderman should focus on real problems," among others.

The companies claim their contests are games of skill, not chance, and therefore not within Schneiderman's jurisdiction. Further, they said their operations don't amount to "bookmaking" because -- unlike a casino -- they don't collect a profit based on who wins or loses but merely through "entry fees" players pay. Both lawsuits were filed in state Supreme Court in Manhattan.

DraftKings and FanDuel accused Schneiderman of "acts of retaliation and intimidation" and "abuse" of power, saying his office contacted their payment processors and threatened them with legal action as well.

"These actions were intended to immediately disrupt FanDuel's New York business adversely, and they have done so," FanDuel said in its lawsuit.

Schneiderman aide Damien LaVera said in an email, "DraftKings and FanDuel are operating illegal sports betting websites under New York law, causing the same kinds of social and economic harms as other forms of illegal gambling. Because both companies have refused to follow the law in our state, we will take action to enforce state law."

With Jim Baumbach