Legal Pressure Differentiates DraftKings and FanDuel

Although many think that Daily Fantasy Sport (DFS) leagues are the same, the way DraftKings and FanDuel have tackled recent legal concerns illustrates just how different two leagues can be.

Recently, the New York Attorney General issued cease and desist orders to both companies, despite DFS gaining support from investors. Specifically, the orders allege that the DFS leagues are in violation of applicable state gambling laws.

Neither company is pleased with these orders, but both have taken different approaches. DraftKings has been vocal with its dissatisfaction, calling the New York Attorney General’s decision “hasty and uninformed.” DraftKings asserted they are taking legal action to ensure that the New York Attorney General is not the “judge, jury, and executioner” of DFS. In fact, DraftKings even went so far as to call the AG’s decision a “fundamental misinterpretation and misapplication of the law.” (You can read some analysis of the laws here).

FanDuel has taken a more measured approach. Unsurprisingly, they announced their plans to fight the decision by the New York Attorney General. In the meantime, FanDuel plans to comply with New York Attorney General’s orders until they have their day in court, and as a precautionary measure they have stopped accepting entry fees from New York.

What DFS Games Differ the Companies?

While DraftKings offers Golf and NASCAR as options to play on, these are considered to be the outliers of DFS games that fit within the UIGEA. Strictly speaking, “the UIGEA also requires bets are placed on players across on multiple events, this is easy to do in a season long fantasy league because it consists of multiple games.

While FanDuel acknowledges that Golf is a highly lucrative option, they have declined to offer it to their users. In 2014 the FanDuel CEO stated, “We won’t be introducing fantasy golf. I think it is commercially attractive (it’s probably our next most requested sport) but I’m uncomfortable with the legality of it. Every time I have to make a decision like this I think whether the argument would stand up in court. To me a reasonable person would consider a golf tournament to be a single event, not multiple events. Therefore it would not fall under the UIGEA safe harbor. That does not automatically make it illegal (it may still be a game of skill under state law) but it does make it more risky.”

Why Different Approaches?

DraftKings is taking negative advertising and tackling it head on, while  FanDuel is taking a backseat and is willing to let its lawyers play defense. While DraftKings has taken a stronger approach in exploring the legality of DFS by offering Golf and NASCAR, FanDuel has been rather laid back in the DFS industry and only offered those events that fit more clearly within the safe-zone provided by the UIGEA.

In pure numbers, both approaches have failed to keep their players playing. It was reported last month that DraftKings had a 12% decrease in entry fees, and FanDuel had a 3% decrease. Although decreases are likely the result of the negative publicity, the rate of decrease can be attributed to how the companies are handling themselves under the added pressure.

 

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One Comment Add yours

  1. James Landry says:

    The New York Attorney General is making it clear that he will not allow any DFS in the state; today he also subpoenaed Yahoo.

    Like

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