The big legal guns are slugging it out in the media over whether daily fantasy sports betting on sites such as Draftkings and FanDuel are legal in New York. Eric Schneiderman, the New York Attorney General, wrote an op-ed in the New York Daily News about why he thinks such betting sites should be considered illegal unregulated gambling, and Draftkings outside counsel David Boies, the attorney who took on Microsoft in an antitrust trial, held a call with the press on why the attorney general is wrong.
An emergency hearing on the matter is scheduled for Wednesday with the a judge at the New York Supreme Court. The attorney general wants to make it illegal to offer such betting in New York, where FanDuel has operated for eight years and Draftkings has operated for four years. Both sites drew a lot of attention recently because of an insider betting scandal at FanDuel and Draftkings and because of their heavy advertising on sports TV channels.
“It’s an important issue for the company and the hundreds of thousands of people who like” daily fantasy sports, Boies said in the press call. “New York law expressly permits New Yorkers to pay entry fees to contest for fixed prizes. New York law even expressly permits New Yorkers to wager on contests of skill in which they personally participate. Anyone who has ever played a daily fantasy sports contest knows that this is a contest of skill.”
In daily fantasy sports, participants assemble teams of pro players, with limitations such as a salary cap. The participants bet a specific amount of money and score a fixed prize if they win. The winner is determined by how well the pro players do on the actual playing field. Draftkings, Yahoo, and FanDuel argue that these are games of skill that require knowledge of the abilities of professional football players and how well they are likely to do in games.
Above: David Boies, right, is the outside counsel for Draftkings in its dispute with New York over betting in daily fantasy sports.
In New York, as well as about 40 states in the U.S., skill-based games are legal and are not considered gambling. Poker and betting on video game contests are considered games of skill. Games of chance, where luck predominantly determines who wins, are considered gambling and are illegal in most states. Craps and slot machines are considered games of chance.
Boies noted that the dispute in New York isn’t about how the daily fantasy sports games are marketed. Some people object that the companies have blanketed the air waves during sports broadcasts, and those companies are thus trying to hook minors, unskilled adults, and others in a gambling-like activity. He said the dispute was purely about the legality of the activity under New York law.
Section 225, paragraph 2 of the New York penal code says, “A person engages in gambling when he stakes or risks something of value upon the outcome of a contest of chance or a future contingent event not under his control or influence, upon an agreement or understanding that he will receive something of value in the event of a certain outcome.”
Boies said, “The attorney general has obviously changed his mind as to whether daily fantasy sports games should be conducted in New York. He is entitled to change his mind. He is not entitled to unilaterally change the law. The law entitles New Yorkers to play these games. They enjoy the games. It is a very popular form of entertainment. We are hopeful the court will rule the New York attorney general does not have the right to shut down this kind of competition. If there is going to be a change, it has to come from the legislature.”
Schneiderman, responding to earlier comments and editorials from the companies, wrote in an op-ed in today’s New York Daily News, “FanDuel and DraftKings have made the argument, over and over — including yesterday in this paper — that they run “games of skill” and are therefore legal. This is nonsense. New York law prohibits sports wagering — betting money on a future event outside of the gambler’s control — regardless of the skill involved. Yet this provision of the law is deliberately ignored by both FanDuel and DraftKings.”
He added, “Consider the final moments of a football game where the outcome has been decided and the winning quarterback takes a knee to run out the clock and assure victory. Let’s say it’s Eli Manning, and the Giants are defeating the Eagles or the Cowboys. Statistically, this play would cost the quarterback one yard — a yard that could make the difference between someone on DraftKings or FanDuel winning or losing tens of thousands of dollars. What did that have to do with the bettor’s skill? It’s the classic risk involved in sports betting. Games of chance often involve some amount of skill; this does not make them legal. Good poker players often beat novices. But poker is still gambling, and running a poker room — or online casino — is illegal in New York.”
Above: Eric Schneiderman, attorney general of New York.
Boies said there is some chance in every game of skill. Even in chess, about 8 percent of the outcomes are decided by chance, he said.
“Who goes first? That’s determined by the flip of a coin,” Boies said. “Even in games that are predominantly chance, there can be some skill involved. The question is a practical one. Does skill predominate or does chance predominate? The question is if the player can control or influence the outcome. The more skillful players consistently win. A statistician analyzed the results of the Draftkings daily fantasy sports winners … and concluded the likelihood that it was due to chance was one out of a trillion trillions.”
He added, “If you are able to influence or control the game, it is not gambling under New York law….Less than 11 percent of players repeatedly win the contests. That does not happen unless the players influence the outcome.”
After the New York attorney general declared the daily fantasy sports to be illegal gambling, DraftKings hired Boies and Jonathan Schiller, who together founded the law firm of Boies Schiller & Flexner, as outside counsel. FanDuel has stopped operating in New York, but Draftkings and Yahoo are continuing to do so.
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