DraftKings ups the ante in New York legal dispute

DraftKings is defending its decision to continue operating in New York while prosecutors tries to bar the daily fantasy sports site and rival FanDuel from operating in the state.

Speaking in a conference call with reporters on Tuesday, DraftKings lawyer David Boies argued that New York Attorney General Eric Schneiderman is trying to put his client out of business without due process, saying that the company has operated in the state for nearly four years without any problems.

FanDuel, which is based in New York and which has temporarily ceased operation in the Empire State, also claims it is being treated unfairly. Both companies argue that Schneiderman has overstepped his legal authority. A hearing on Schneiderman's challenge is scheduled to be heard on Nov. 25.

Shutting down in New York would be unfair to DraftKings customers "because the attorney general -- however well-intentioned -- has changed his mind as to whether this is legal or not without taking that question to the court," Boies, one of the country's best-known trial lawyers, said. "The attorney general is not the official who is entrusted to interpret the law."

DraftKings and FanDuel reject Schneiderman's that they promote gambling, arguing that competing in fantasy sports contests is a game of skill, not chance. Legal experts note there are no clear legal standards in New York and many other states that clearly outline the difference between the two.

Schneiderman charges that DraftKings and FanDuel "fleece" sports fans because most of the money in their contests are won by a small group of "professional" players. Such an admission, though, helps prove DraftKings' case, Boies said.

"That is absolute proof that this is a game of skill and not chance," he said. "That kind of dispersion of results does not happen in casinos. It does not happen in games of chance. It does happen in games that are beyond the control of the player. That only happens in games of skill where the player cannot influence the outcome."

In an op-ed on Thursday in the New York Daily News, Schneiderman called daily fantasy sports "a particularly pernicious form of illegal gambling," noting that players can participate using their smartphones and other mobile devices. He also has claimed that DraftKings and FanDuel liken their businesses to gambling operations in conversations with investors and use gaming terms in their search engine marketing.

Boies rejected these claims, arguing that Schneiderman's staff is "taking things very badly out of context and attributing things to people that never said them." He also said that New York courts aren't deciding if daily fantasy sports amounts to gambling, but rather whether it represents illegal gambling.

Gambling in the state is prohibited under New York's constitution. The only exceptions are for horse racing, bingo for charitable or religious institutions, the state lottery, and casino wagering, though no facilities in the state have been licensed.

A spokesman for Schneiderman declined to comment.

Other states are taking a different approach to regulating daily fantasy sports. Massachusetts Attorney General Maura Healy announced new rules for the industry earlier this week, including prohibitions on players under age 21 from participating and on games based on college sports. Professional athletes and others connected to pro sports also would be banned from playing. Both DraftKings and FanDuel said they welcomed Healy's approach.

In court documents filed by DraftKings, the Boston-based company forecast that the daily fantasy industry will take in $4 billion in entry fees this year. That number is expected to surge to $20 billion in 2017.

Editor's Note: CBS has an investment in FanDuel of less than 1 percent of that company's value.

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    Jonathan Berr is an award-winning journalist and podcaster based in New Jersey whose main focus is on business and economic issues.