Daily fantasy sports industry awaits New York court decision

The daily fantasy sports industry in the United States is anxiously awaiting a ruling by a New York Court on the legality of daily fantasy sports in the state following an application for an injunction against DraftKings by state AG Eric Schneiderman (see previous reports).

Schneiderman filed the application on November 17 after issuing a cease and desist order on market leaders DraftKings and FanDuel. The latter company cut off New York players, but DraftKings contested the issue and continued to operate.

The AG sought the district court’s ruling on the legality of DFS under state laws, asking for authority to enforce the cease and desist order, which Judge Manuel Mendez is currently considering. The judge has intimated that he will not take long to issue a judgement after hearing arguments from both sides last week.

The AG claims that DFS constitutes online gambling because it involves mainly chance, whilst FanDuel and DraftKings claim that skill is predominant and that the DFS phenomenon is therefore legal and not gambling.

Keeping the DFS kettle boiling in New York, a local resident has cited several prominent banking, facilitating, payment processing, and online gambling companies in a class action filed November 18 in the U.S. District Court for the Southern District of New York.

Yehuda Guttman claims that companies like Visa, MasterCard, American Express Credit Corp., J.P. Morgan Chase & Co., Merrick Bank Corp., Capital One Bank, Paysafecard.com USA, Vantiv, FanDuel and DraftKings illegally collect on gambling debt, alleging violations of New York General Obligation Law, unjust enrichment, fraud and misrepresentation, and negligence.

Guttman is one of thousands of people who have bet and lost money through FanDuel’s and DraftKing’s allegedly illegal sports gambling sites, the complaint states, claiming that banking defendants lent money or credit to him for wagers he placed on the gambling sites.

The facilitators (Visa, MasterCard, and American Express) received a fee from the banks for facilitating the money transfer, and the payment processors (Paysafecard.com and Vantiv) serve a “player banking function,” receiving a fee as the financial intermediary between the gambling sites and their customers, Guttman alleges.

The banks have allegedly collected and continue to collect debts on the credit they lent for the purpose of wagering on the gambling sites. But the suit states New York law prohibits the enforcement or collection of debts issued for illegal gambling.

Attorneys Hunter J. Shkolnik and Annie E. Causey of Napoli Shkolnik in New York City, and by attorney Brittany Weiner of Imbesi Law in New York City represent Guttman in the case: U.S. District Court for the Southern District of New York case number 1:15-CV-09084-UA

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