Daily Fantasy Operators Allowed to Resume Play in New York State

Sports

New Yorkers will have daily fantasy sports this football season, as the New York State Gaming Commission announced Monday that it had given the country’s largest fantasy site operators permission to resume play in the Empire State.

DraftKings, FanDuel, Yahoo! (YHOO) , FantasyDraft and StarStreet‘s Draft, were given permission Monday to resume operations immediately in New York state.

The decision stems back to a January lawsuit from New York Attorney General Eric Schneiderman against DraftKings and FanDuel, which sought to shut down the daily fantasy websites under the grounds that they hosted gambling and were operating illegally under New York law.

Schneiderman’s team was granted a temporary injunction on Dec. 11 to stop DraftKings and FanDuel from operating in New York, but hours later, an appellate court reversed the decision.

Fans of the games responded, holding protests across the state calling for Schneiderman to allow daily fantasy sports play to continue.

The New York state legislature voted June 18 to legalize online daily fantasy sports, a coup for the industry after months of legal wrangling in the state. On Aug. 3, New York Gov. Andrew Cuomo formally signed a bill that legalized and regulated contests in New York.

The New York bill imposes a 15.5% tax on gross revenue for DFS site operators, FBI background checks for officers or directors of daily fantasy sports companies and oversight from the New York State Gaming Commission on the contests. Betting on college sports, high school sports or horse racing is not permitted.

“As the newly enacted law requires, the Commission regulates all aspects of interactive fantasy sports, including ensuring the operators put important consumer protections in place,” Gaming Commission Executive Director Robert Williams said in Monday’s statement.

About 12% of total daily fantasy sports (DFS) players live in New York. New York’s is the eighth state legislature to legalize the games, while states such as Florida and Texas continue to evaluate the issue.

The two companies have lost nearly half their value as their operations have been halted in 11 states, including New York and Texas. Lawmakers are deliberating whether to allow the sites to start operating again. In February, Rupert Murdoch’s 21st Century Fox (FOXA) revealed in a regulatory filing that it had marked down the company’s $160 million investment in DraftKings by more than 60%.

Other investors can’t be happy. For DraftKings, they include Madison Square Garden (MSG) , New York merchant bank Raine Group and Kraft Group, which owns the New England Patriots. FanDuel is backed by Kohlberg Kravis Roberts (KKR) and Time Warner (TWX) , among others. They also have received funding from venture firms including Shamrock Capital Advisors, GGV Capital and Atlas Venture as well as nontraditional investors such asMajor League Baseball, the National Hockey League, the National Basketball Associationand Major League Soccer.

Given these troubles, DraftKings and FanDuel went so far as to float a merger in June, though sources dismissed those talks as a Hail Mary meant to save the firms amid an unsteady legal outlook.

According to the release from New York, the Commission will continue to review permit application materials from additional operators in New York state.
“This success in New York speaks to the strength and passion of our players who stood up and made their voices heard–and their elected leaders responded,” FanDuel CEO Nigel Eccles said in a statement on Aug. 3 after Cuomo’s affirmation of the bill.
[Source:-The Street]