DraftKings, FanDuel Sue N.Y. Attorney General Over Shutdown Order

Fantasy-sports websites DraftKings and FanDuel are fighting back against the New York attorney general’s order to cease operations in the Empire State.

On Friday, the two companies separately filed appeals to stop the motion by New York attorney general Eric Schneiderman, filed Tuesday, that DraftKings and FanDuel are illegal gambling outlets subject to criminal penalties. The startups pay out daily cash prizes to users based on their player picks; ergo, according to DraftKings and FanDuel, their services are games of skill (not games of chance).

The New York AG’s ruling “is unconstitutional, an abuse of discretion and simply wrong,” DraftKings said in a statement.

FanDuel, which has already said it will fight the decision, said in a statement: “We have a legal business that millions and millions of people love, and we are entitled to due process and look forward to being heard in court.”

The daily fantasy-sports sites are appealing to the New York Supreme Court to overturn the AG’s decision. The legal showdown comes after allegations that a DraftKings employee used proprietary data to win $350,000 in a wager on FanDuel in October.

According to an independent investigation conducted by New York-based Greenberg Traurig into the incident, the DraftKings employee, Ethan Haskel, “did not utilize nonpublic information regarding aggregate player ownership percentages in fantasy lineups in DraftKings daily-fantasy sports games when the September 27th, 2015, FanDuel lineup was entered.” In addition, according to the lawyers for DraftKings, “It would have been impossible for Mr. Haskell to have used such nonpublic information because he only gained access to internal DraftKings data a full forty minutes after the lineup was locked.”

In a statement, Schneiderman’s office said in part: “Online sports gambling sites are illegal in New York. 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.”

Both DraftKings and FanDuel are backed by major media companies.

21st Century Fox-owned Fox Sports led a $300 million funding round in DraftKings this summer. That came after FanDuel announced $275 million raised from Time Warner, Google and other investors.

In June, ESPN signed a multiyear deal with DraftKings under which ESPN would become the site’s exclusive daily fantasy-sports partner.

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