DraftKings and FanDuel say they offer games of skill. But New York Attorney General Eric T. Schneiderman says the daily fantasy sports websites constitute gambling and wants them banned from conducting business with New Yorkers.
The two websites represent the leaders in what has become a booming multibillion-dollar industry. Their television commercials boast that people can win millions in daily contests depending on the performance of the players they choose in just about any sport.
Daily fantasy sports websites are banned in six states, including Nevada. Schneiderman began the process in New York on Nov. 11 by sending cease-and-desist letters to the websites. He formally asked a state Supreme Court judge to shut the companies down Nov. 17.
Judge Manuel Mendez listened to arguments from attorneys representing Schneiderman, DraftKings and FanDuel during an emergency hearing in a Manhattan court on Wednesday and said afterward that he planned to rule soon on the attorney general's request for an injunction.
The two competing websites have reacted differently to Schneiderman's actions.
DraftKings, based in Massachusetts, retained high-profile attorneys David Boies and Jonathan Schiller while continuing to allow New York residents to enter their contests.
"DraftKings will continue to operate in New York while we pursue all legal options available to prevent the New York attorney general from denying our customers their right to play the games they love," the company said in a statement.
FanDuel, based in New York City, has stopped allowing New Yorkers to play.
"We believe that this restriction is temporary and we hope to be able to offer our paid contests to New Yorkers again very soon," FanDuel said.
The two companies say close to a million New Yorkers are registered to play on the competing websites.
Sports leagues back sites
Schneiderman's move to shut down the websites presents a thorny issue for the pro sports leagues, who have supported and even invested in them. Major League Baseball, the National Hockey League and owners of the Dallas Cowboys and New England Patriots are DraftKings investors. The National Basketball Association has a stake in FanDuel.
The leagues also were named as defendants, along with DraftKings and FanDuel, in a class-action lawsuit filed Nov. 21 in federal court in Florida by two daily fantasy players. Two players, who live in Florida, where the games are legal, are accusing DraftKings and FanDuel of illegal gambling and deceptive advertising. They say the leagues "are responsible for the growth of the illegal Internet gambling enterprise to become a multibillion dollar business by providing legitimacy and funding for what is, in fact, an illegal activity."
At issue here is whether these are games of skill or chance. New York law bans any type of wagering on "a contest of chance."
"I think the 'skill' versus 'chance' distinction collapses when we consider what types of games the law permits and what types of games are heavily regulated and in some cases outlawed," said Michael McCann, the director of the Sports and Entertainment Law Institute at the University of New Hampshire.
"Lotteries are clearly all about chance, and yet we allow people to spend money -- without limitation -- buying lottery tickets," he said. "Why are lottery tickets OK, but sports betting and daily fantasy sports aren't?"
Many who use these websites to enter daily fantasy sports contests insist they have used "skill" in order to win money. "It kills me when people are so negative toward it, saying it's all luck," said DraftKings player Ross Klein, 43, of Glen Cove. "There is luck involved, but you need to have information."
Unlike traditional fantasy leagues, in which competitors pick a team and play out a season, DraftKings and FanDuel offer new tournaments every day. Entry fees for daily contests range from 25 cents to $5,300. Tournaments include NFL, MLB, NBA, NHL, MLS, NASCAR, PGA, mixed martial arts and college football and basketball games. The sites also offer free daily contests with no prize money. To get started, players open an account and deposit funds. FanDuel said the average initial deposit is $25. From there, entrants pick their teams using fictional money. Each athlete is given a "salary" based on how valuable he or she is and entrants are given a salary cap to stay under. How those players perform in real life that night determines who wins.
THE HOUSE'S CUT
FanDuel and DraftKings make money by taking a percentage of entry fees, typically between 10 and 15 percent. For example, it costs $20 to enter DraftKings'most popular football challenge. The contest rules says they will accept a total of 286,200 entries will be accepted, bringing in $5.7 million in revenue. That contestwill pay out $5 million in prizes -- including $1 million to the winner -- leaving DraftKings with a $700,000 profit.
Hours of research
Klein, who was laid off from a printing company in August, said he played on DraftKings every day during the baseball season. He said he spent four hours before the start of nightly baseball games researching matchup histories between hitters and pitchers as well as other predictive statistics.
Douglas Jaffe, a 47-year-old restaurant owner who lives in Commack, said his scouting begins over his morning coffee. In addition to scouring over statistics, Jaffe looks at weather reports in an effort to avoid any players whose game may be rained out. He returns online in the evening to make sure there were no last-minute injuries.
"By pure definition, it's gambling because you can win money or lose money based on something you're entering," Jaffe said. "But it also takes a lot of skill, too."
Both Klein and Jaffe have the winnings to back up their argument.
Jaffe said he has won payouts of $5,000 and $50,000 after finishing first in separate tournaments that both included around 700 entrants.
He credited his hours of preparation each day as the reason he was successful. "No one," he said, "is that lucky."
Klein said he's netted more than $30,000 this year, including a $20,000 payout for winning a football tournament last month that also qualified him for the next round in DraftKings' "Fantasy Football World Championship."
Klein is one of 200 people whom DraftKings will fly to San Diego next month to compete in another tournament for the grand prize of $5 million. But Klein worries that being a New York resident might disqualify him.
Klein said when he called DraftKings recently and asked whether his New York residency might affect him, the representative told him they "don't have any answers for me right now."
"Believe me, I know there are people who do this for a living and they make a whole lot more than I do. I know my chances are not good to beat them," Klein said. "But I want that opportunity."
The typical daily fantasy sports player is not preparing -- or spending as much -- as them each day. FanDuel said 62 percent of its entries each night are for $1 or $2 tournaments.
Klein said his wife, Erica -- a stay-at-home mother of their 2-year-old daughter -- started playing earlier this year, and that has made watching baseball together each night more fun. She plays daily baseball tournaments with $3 entries.
FanDuel said in a recent court filing that its users are typically married males between ages of 25 and 44 who live in a small town or suburb and make more than $75,000.
FanDuel also says the attorney general's accusation that the games attract problem gamblers is false. Of the 268,014 New Yorkers who have paid to play on FanDuel in 2015, they say 172 have lost more than $10,000 and 16 have lost more than $50,000.
Invested in the game
From the casual to the obsessed, daily fantasy sports players say they get an adrenaline rush out of seeing players do well for them in games they otherwise wouldn't be watching. That's why the professional sports leagues have supported these companies.
"It's definitely changed my Sundays watching football," said Eddie Finn, 24, of Commack, who works at a retail store. "Instead of just watching the Jets and Giants games, I'll watch every game."
According to the Fantasy Sports Trade Association, which has represented the industry since 1998, 61 percent of fantasy sports players say they watch more live sports because of the fantasy games they play.
Patrick Bedell, a 21-year-old college student from Merrick, said he intentionally plays daily fantasy games with sports he's not as interested in -- such as football -- as a way to force himself to become engaged. He said he's enjoyed watching football with friends because of that.
"Every day," Bedell said, "is like a Game 7 in daily fantasy sports."
With the immediate future uncertain for daily fantasy sports in New York, Long Islanders are preparing for life without playing these games.
Matt Soldano, 25, of Sea Cliff, who works for a technology company, said he already has cashed out the $90 he had in his account, just in case. Klein did the same with the $5,000 in his account.
"I'm not making a living out of this, but with basketball and football going on now, there's something to play every night," Klein said. "If it goes away, I'll have nothing.
"Don't get me wrong, I'll survive. But I'm afraid the attorney general is going to go to whatever lengths he can to take this away, and I think he's doing it for the wrong reasons."