Court Allows DFS Operators to Continue Operations in New York Amid Appeal

The Daily Fantasy Sports sites, DraftKings and FanDuel, have been informed that they can continue to operate in New York while they appeal a judge's order to stop operating in the state. This was decided by a panel of appellate court judges.

Appellate Court Decision

The decision by the state's Supreme Court Appellate Division in Manhattan was granted a month after one of the judges on the panel stayed a lower court's ruling that the companies had to stop business in New York.

Background of the Lawsuit

The preliminary injunction came after New York Attorney General Eric Schneiderman sued the DFS companies to end their operations. He argued that they were running illegal gambling operations. The case is set to go before the court during its May session.

David Boies, a lawyer for the Boston-based DraftKings, said that as their litigation continues, they expect the appellate court to see what they have known since the outset: that DFS is a game of knowledge and skill that builds community, whose competitive spirit is important to the lives of millions of people.

Arguments from Both Sides

This ruling is the most recent development in the legal saga that began in November, when A.G. Schneiderman's office first issued cease-and-desist letters to the companies.

Since then, A.G. Schneiderman has argued that the games are illegal because they depend on factors out of players' control, such as the weather or blown calls.

Damien LaVera, A.G. Schneiderman's spokesman, said that having already secured a preliminary injunction against the companies, they look forward to demonstrating to the appellate division that the trial judge was correct, and that DraftKings and FanDuel were operating illegal gambling operations in New York. Therefore, they should be permanently barred from doing business there.

Potential Business Impact

Both DraftKings and the New York-based FanDuel have argued that their businesses would be greatly harmed if not allowed to continue their New York operations during the appeal process. This is taking place during the NFL playoffs.

The two highly popular companies together took in a combined $3 billion last year. They partnered with sports companies such as ESPN and Major League Baseball. But their very aggressive ad campaign that ran ahead of the 2015 NFL season drew attention from regulators and lawmakers. This led to questions about their business models in states like Illinois and Nevada.