FanDuel to halt Texas DFS contests, but DraftKings fights on

Texas AG Ken Paxton has applauded a decision by daily fantasy sports operator FanDuel to withdraw from the Texas DFS market following his opinion that the genre is contrary to state law and constitutes gambling.

Paxton was reacting to an announcement by FanDuel that it would withdraw its DFS contests in May this year but continue to lobby state lawmakers to regulate and licence intrastate daily fantasy sports.

The decision followed a settlement negotiation with the AG’s office, releasing FanDuel from any future claims by the state and any obligation to pay restitution, damages or fines. Besides agreeing to block people in Texas from entering paid contests, FanDuel said it won’t bring action for a declaratory judgment or help any other entity in doing so.

FanDuel emphasised that it believed its operations are legal, but that laws surrounding fantasy sports in Texas require clarity.

Applauding the FanDuel decision, AG Paxton declared in a statement Friday:

“I commend FanDuel for responsibly and pro-actively working with us to reach this settlement. This will spare both the company and the taxpayers of Texas the expense of an extensive lawsuit that I believe would only affirm what my office has already determined.”

FanDuel emailed players in the Lone Star State, advising its decision and commenting:

“The Texas Legislature will be in session in 2017 and we will work to pass legislation that protects fantasy sports and consumers so that we can bring our paid contests back to Texans as soon as possible. Users still will be able to take part in free head-to-head challenges and leagues after paid entries are suspended.”

The Houston Chronicle reports that FanDuel rival DraftKings has taken a more confrontational approach to the Texas problem, filing litigation against the state in Dallas Friday in an attempt to ensure that it can continue to operate.

In a statement to media, DraftKings legal representative Randy Mastro referred to the company’s request for a declaratory judgement and said:

“We look forward to presenting evidence to demonstrate that Daily Fantasy Sports are skill-based games and perfectly legal under Texas law, certainly no less so than other kinds of skill-based contests.”

The DraftKings petition, which requests a jury trial, names Paxton as defendant, and asks the court to declare that daily fantasy sports contests are legal.

The filing claims that the company wants to prevent the AG from “further acting to eliminate daily fantasy sports contests enjoyed by hundreds of thousands of Texans for the past decade.”

Mastro stressed that DraftKings continues to work collaboratively with legislatures and attorneys general across the country to put in place a regulatory framework for its contests, along with thoughtful and appropriate consumer protections.

Texas AG Paxton issued his January legal opinion on DFS after he was asked for a non-binding opinion by a state lawmaker. In it, he said the outcome in daily fantasy sports depends partly on chance, so a person is making a bet and a court would likely find the practice to be illegal gambling.

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