The New York State attorney general has ordered daily fantasy sports (DFS) sites to stop taking action from NY players in a move that could absolutely cripple the once high-flying sports betting niche.

On Tuesday, NY AG Eric Schneiderman to stop taking “bets” (his words) from NY residents in a cease-and-desist letter delivered to lawyers at DraftKings and Fan Duel – the two operators that control more than 90% of the DFS market. Though Schneiderman didn’t order the companies to shut down their NY offices, he also didn’t mince words when it came to describing what the State of New York thinks of DFS saying:

Our review concludes that DraftKings’/FanDuel’s operations constitute illegal gambling under New York law.

And with those 14 words, Schneiderman delivered an absolutely devastating blow to an industry that’s been battered non-stop since the insider trading scandal broke in the beginning of December.

While other states have been scrutinizing the DFS industry, New York is the first state to call out the industry as a front for sports betting, and to use the term, “bet,” when describing the game.

But what about the Unlawful Internet Gambling Enforcement Act (UIGEA) and its famous exemption for fantasy sports? Schneiderman argues that:

…each DraftKings/FanDuel wager represents a wager on a ‘contest of chance’ where winning or losing depends on numerous elements of chance to a ‘material degree.

In short, New York State does not think the outcome of a DFS tournament has anything to do with skill and everything to with chance. That distinction between skill and chance is the thin patch that allowed DFS sites to operate sports betting sites in the US and that loophole appears to be closing at an extremely rapid pace.


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