New York attorney general orders daily fantasy sports firms to shut down – Daily fantasy sports Daily fantasy sports has grown into a multibillion-dollar industry. Bryan Armen Graham in New York

New York’s attorney general declares daily fantasy sports games illegal

DraftKings, FanDuel contend their games are based on skill and not luck

Daily fantasy sports

Photograph: Stephan Savoia/AP

New York’s attorney general has ordered daily fantasy sports firms DraftKings and FanDuel to cease operations with consumers in the state, claiming their games constitute illegal gambling under New York law – the most significant blow yet in the mounting legal challenge facing what’s become a multibillion-dollar industry.

The cease-and-desist order from the state’s top attorney was first reported on Tuesday by the New York Times, citing sources with knowledge of the investigation.

The order from attorney general Eric Schneiderman comes less than one month after it was revealed that federal prosecutor Preet Bharara – the US attorney for the southern district of New York widely credited with shutting down the online poker industry in 2011 – was investigating whether the business model behind daily fantasy sports is in violation of federal law.

“Our investigation has found that, unlike traditional fantasy sports, daily fantasy sports companies are engaged in illegal gambling under New York law, causing the same kinds of social and economic harms as other forms of illegal gambling and misleading New York consumers,” Schneiderman said in a statement. “Daily fantasy sports is neither victimless nor harmless, and it is clear that DraftKings and FanDuel are the leaders of a massive, multibillion-dollar scheme intended to evade the law and fleece sports fans across the country.

“Today we have sent a clear message: not in New York and not on my watch.”

Daily fantasy sports players handpick virtual teams corresponding with real-life athletes and compete for points based on the players’ statistics. Paid competitions varying in format and waged each day cost as little as $1 to enter, but advertise prizes that can reach $2m.

Industry-leading firms DraftKings and FanDuel, each privately owned and valued at over $1bn, have long operated beyond government sanctions on sports gambling under the precept that their games involve more skill than luck, not unlike day trading.


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Betting on the Fantasy World – By Max Miceli Oct. 30, 2015 | 1:01 p.m. EDT

Fantasy sports sites like DraftKings and FanDuel have carved out a booming online niche – but can they sustain their success?

The Associated Press

An employee at DraftKings, a daily fantasy sports company, walks past screens displaying the company’s online system stats in Boston.

It’s Sunday morning, and 26-year-old Ethan Sturm logs on to his computer at home in Boston and begins his search. Scrolling through the thousands of potential competitions he can enter via the daily fantasy sports site FanDuel, Sturm picks out a few contests and starts crafting his lineups.

He doesn’t want to get into any of the larger tournaments, preferring to face off against 100 or so competitors or less. He uses what’s called a lineup optimizer – a tool available for free on other fantasy sports sites that projects player output – to help him make his decisions, and figures out how much money he wants to wager.

[DEBATE CLUB: Are Daily Fantasy Sports Gambling?]

This is Sturm’s first year playing daily fantasy football – a variation on the more popularly known and season-long fantasy sports leagues – but he trusts his instincts and knowledge of the game, gleaned from years of playing in normal fantasy leagues and countless hours listening to podcasts on his commute to work.

Some liken it to the high-risk, high-reward atmosphere of day trading, in which small fortunes can be made and lost on the whims of volatile financial markets. Others take a less forgiving view, saying such activities amount to legalized online gambling and that they need to be stopped – or, at the very least, monitored much more closely.

Daily fantasy allows a player to join any number of leagues on a given day, pay a small entry fee, construct a lineup and win – or lose out on – cash prizes that depend on the contest. The only constraints on the fantasy roster are fictitious salary caps: The site assigns dollar values to specific players based on their projected performance, and contestants are required to submit lineups with players whose arbitrary values don’t exceed the cap.

At first, Sturm started with free competitions on FanDuel that reward winners with small sums of cash, but he quickly graduated to wagering money.

“Early this year, I won a $20 (tournament),” Sturm says. “I’ve just kind of been using that as my bankroll for playing in small tournaments.”

Meanwhile, 750 miles and a half-dozen states away in North Carolina, 42-year-old Paul Guerrero is doing nearly the same thing.

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Poker is gambling. Everyone knows that. But if poker is a game of “chance,” then why are some people so much better at it than others? For daily fantasy sports sites, that fine line between games of skill and games of chance could determine whether they stay in business.

Over the past week, regulators and law enforcement have taken significant interest in the heavily advertised and nominally regulated industry. The Justice Department and the FBI are investigating whether daily fantasy sports sites violate federal law. Nevada regulators decided that such sites constitute gambling and told them to cease operation until they secured proper licenses. In Florida, prosecutors convened a grand jury to investigate their legality. Then there’s the New York Attorney General’s inquiry, not to mention a class-action suit filed in federal court against the two biggest operators, DraftKings and FanDuel.

Daily fantasy sports sites DraftKings and FanDuel, as we’ve written, have always operated in murky territory. But they’ve been exposed to harsh light following revelations that a DraftKings employee inadvertently released company data on player lineups before the third week of NFL games. That same week, he won $350,000 at FanDuel, raising suspicions that he used insider knowledge to cash in.

Daily fantasy sites operate under an exemption to the Unlawful Internet Gambling Enforcement Act of 2006. The law effectively bans online gambling in the US by prohibiting banks and credit card companies from transferring money to online gambling sites. Congress made an exemption for fantasy sports sites, which lawmakers deemed a “game of skill and not chance.”  The thing is, most games involve skill and chance. There’s no catch-all test to quantify how much skill and how much chance are involved in a particular game—and no legal standard that identifies a threshold at which gaming becomes gambling.

‘Games of Skill and Not Chance’

The actual language of the law singles out fantasy sports and says all winning outcomes in such games “reflect the relative knowledge and skill of the participants” and are “determined predominantly by accumulated statistical results of the performance of [athletes] in multiple real-world sporting.”

This is the carve-out often bandied about as the reason why the fantasy sports industry has so far escaped regulation. When lawmakers passed the in 2006, fantasy sports were predominantly played in small groups among friends. That changed radically about a year later, when daily fantasy sports emerged. The game migrated online, where anyone could join in. Players could create multiple lineups and play daily. Some players use custom-built models and computer software to crunch data and improve their odds.

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The Deals That Made Daily Fantasy Take Off – By Matthew Futterman and  Sharon Terlep Oct. 16, 2015 8:55 p.m. ET

Federal probes of FanDuel and DraftKings pose this question: How did they get so big?

FanDuel and DraftKings control some 95% of the North American daily-fantasy-sports market, spending lavishly on ads and awards.

FanDuel and DraftKings control some 95% of the North American daily-fantasy-sports market, spending lavishly on ads and awards. Photo: Scott Olson/Getty Images

FanDuel and DraftKings, intense competitors that control some 95% of the North American daily-fantasy-sports market, have made a splash in recent months with lavish spending on advertisements and cash awards for the winners of their contests.

But with the U.S. Justice Department and the Federal Bureau of Investigation opening probes this week into the business model of these companies, and after gaming regulators in Nevada ordered the sites to cease operations in their state, the question is this: Where did these troubled companies come from, and how did they get so big so fast?

FanDuel says it will dole out $2 billion in prizes this year. DraftKings has pledged to give away at least $1 billion. The companies are valued at $1.3 billion and $1.2 billion, respectively.

New-York based Fanduel, which was early to the market in 2009 and long the dominant player, started with a relatively muted approach. It gave fantasy-sports players a chance to compete for prizes by building virtual teams of athletes. In 2013, it raised $11 million in financing from venture-capital companies. The following year it raised another $70 million.

But what pushed the business to its current frenzied level was the fast rise of Boston-based DraftKings, founded in 2012, which adopted a more aggressive fundraising and marketing posture and quickly came to rival FanDuel in size and profile.

Storm of Criticism Engulfs DraftKings, FanDuel – By Sarah E. Needleman Oct. 6, 2015 12:57 a.m. ET

Screen Shot 2015-10-06 at Oct 6, 2015 1.52

Fantasy sports sites DraftKings and FanDuel are under scrutiny after a DraftKings worker won $350,000 in a FanDuel contest, raising questions about fairness and the lack of regulation. WSJ’s Sarah Needleman explains on Lunch Break With Tanya Rivero. Photo: AP

A storm of online criticism has roiled the two largest fantasy-sports companies in North America, casting a spotlight on an industry already under scrutiny for lacking government oversight.

Billion-dollar startups FanDuel Inc. and DraftKings Inc. run online contests in which people draft virtual teams of professional athletes and compete against each other based on the athletes’ real-world performances.

A number of posts on fantasy-sports sites such as RotoGrinders criticized the companies for unfair practices after last week’s admission by a DraftKings employee that he prematurely released data about the site’s biggest contest before some of the National Football League games involved in it had started.

The venture-backed companies released joint statements Monday asserting that they have “strong policies in place” to ensure proper handling of company data.

DraftKings employee Ethan Haskell said on a message board that by accident he prematurely published data to the company’s blog from the lineups of players submitted to the DraftKings site for its Millionaire Maker contest.

“I’ve fixed the error and we’ll be putting checks in place to make sure it doesn’t happen again,” Mr. Haskell wrote on RotoGrinders. “I was the only person with this data and as a DK employee, am not allowed to play on the site. 100% my fault and I apologize for any issues.”


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Does This Ex-Con, Ex-Referee Know the NBA Better Than LeBron? – By Pat Jordan June 14, 2015

Disgraced referee Tim Donaghy sees a different game from the rest of us. Which is why, out of prison, he’s now sports gambling’s golden boy.

Photographs by Simone Lueck

On Easter Sunday, Timothy Francis Donaghy, a self-described “good Irish Catholic boy from Philly,” attended the 7:30 a.m. Mass at St. Martha’s church in Sarasota, Florida, receiving Communion to cleanse his soul. “My mother calls every weekend to make sure I go,” he says, then adds, “I lived with my parents until I was 27.”

On this Easter, Donaghy attended Mass with his daughter, Molly, 13, and his girlfriend of six years, Carolyn Thomas, a blonde hairdresser. But some Sundays Donaghy goes to Mass alone. “I’m Catholic, I’m conditioned to confess,” he says. But “it’s been hard to forgive myself. My sins changed the lives of my four daughters. My wife divorced me. God had given me everything. A great job, money, a wonderful family. I knew it was wrong, but I thought gambling was a venial sin. That’s why I didn’t confess it to a priest until after I was caught.”

Donaghy had been an NBA referee for nine years when, in 2003, he began to place bets on NBA games — though he swore in an FBI lie-detector test, which he passed, that he never “fixed” a game with dubious calls. “I didn’t have to,” he says. “It was too easy using my insider’s knowledge.” After he resigned from the NBA and pleaded guilty in 2007, he was sentenced to 15 months in prison, lost what he describes as his $300,000 annual salary and his six-figure pension, and was ordered to pay $195,000 in restitution. His gambling exploits netted him only $100,000 in winning bets, he swears. “But I didn’t really do it for the money.”

A few days before Easter, at 8:30 a.m., Donaghy and I are sitting at the kitchen counter of his modest townhouse in Sarasota, studying his website, Refpicks. It’s a handicapping service for sports gamblers that employs a dozen other handicappers around the country who specialize in sports other than basketball. Donaghy himself only makes picks for the NBA, using his knowledge of the officials for each game. “I’m the only handicapper in the country who bases his picks on the refs,” he says. He’s successful roughly 60 percent of the time — that’s about five points higher than most professional gamblers, which means that in the world of sports gambling, the name Tim Donaghy is gold. In the real world, that name is mud. Donaghy is usually referred to in the media with a prefix, like a tail pinned to a donkey: “disgraced referee” Tim Donaghy.

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$1m prizes and NFL lobbying: the irresistible rise of daily fantasy leagues – Dan McQuade Tuesday 19 May 2015 06.00 EDT

Websites such as DraftKings are booming but are they showcases for skill or merely spruced up gambling tournaments?

Aaron Rodgers

A concourse under Philadelphia City Hall was recently plastered with ads featuring Peter Jennings. The Peter Jennings in the ads wasn’t the late news anchor who hosted ABC World News Tonight but a former stock trader from Fort Collins, Colorado. That Peter Jennings won big in the DraftKings daily fantasy baseball extravaganza in the Bahamas last August. Jennings, with a broad smile on his face, holds a giant novelty check for $1m above his head.

What’s interesting about the slew of ads under the City Hall is the co-sponsor: The Philadelphia Phillies. DraftKings, founded in 2011, is the “official daily fantasy partner of Major League Baseball”. FanDuel, the other major site for daily fantasy sports, has a strategic partnership with the NBA. As part of that deal, which gave the NBA an equity stake in FanDuel, the league promotes FanDuel’s daily contests on, NBA TV and its other digital properties.

Two American major league sports franchises are advertising extensively to what many say are essentially gambling sites. Due to the 1991 Professional and Amateur Sports Protection Act, sports gambling (other than horse racing) in America is legal in just four states: Nevada, Delaware, Oregon and Montana. Nevada is the only state that offers unfettered sports wagering. So how are daily fantasy sports legal? And how did major American professional sports leagues – which have traditionally had anti-gambling stances – become partners in promoting these sites? It’s complicated.

The rules of daily fantasy sports are similar to regular fantasy sports leagues. In a “season-long” fantasy league, owners — usually 8 to 14 people — acquire players in a draft or auction and manage them throughout the year. They can pick up and drop players, make trades and set lineups on a week or week or day to day basis (depending on the sport or the league).

While many early proto-fantasy leagues existed — William Gamson had one in the 1960s, New Jersey teacher Joe Blandino began one in 1976, a group of fans in the Oakland area had a football league in the early 60s – the spread of fantasy sports dates to Daniel Okrent’s Rotisserie League in 1980. Taught the game by a disciple of Gamson, Okrent and his friends founded a league at La Rotisserie Francaise in New York City. Media members learned of the league through Okrent, an editor and writer, and wrote about it during the 1981 baseball players’ strike, helping spread the word for the format.

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Map: Here’s where Powerball is most popular – Updated by Phil Edwards on March 22, 2015, 11:00 a.m. ET

Along with Mega MillionsPowerball is as close as the United States comes to a national lottery (tickets are sold in 44 states as well as Washington, DC, Puerto Rico, and the US Virgin Islands).

A customer buys a Powerball ticket in 2013. — Scott Olson/Getty Images

Data scientist Seth Kadish mapped Powerball sales as recorded by Lotto Report, while adjusting for population differences and fluctuations from week to week. The week of March 18, for example, Florida sold a national high of 1,255,643 tickets. But when you adjust ticket sales for every thousand people, the picture of Powerball fanatics looks a lot different:

Seth Kadish's map of Powerball states

A map of the top Powerball states. (Seth Kadish)

The map shows daily tickets sold per 1,000 people in the state. As you can see, New England has Powerball fever. The top five states are:

  1. Rhode Island (39.9 tickets per 1,000)
  2. Delaware (39.0 tickets per 1,000)
  3. New Hampshire (36.5 tickets per 1,000)
  4. New Jersey (35.2 tickets per 1,000)
  5. Florida (33.6 tickets per 1,000)

There are a few states that don’t sell Powerball tickets, but there also some in which sales are relatively low. The bottom five states are:

  1. Washington (11.5 tickets per 1,000)
  2. Texas (12.6 tickets per 1,000)
  3. Arkansas (14.2 tickets per 1,000)
  4. Oregon (15.2 tickets per 1,000)
  5. Ohio (15.4 tickets per 1,000)

When jackpots spike, so do Powerball sales

So what drives those New Englanders (and everyone else) to purchase so many Powerball tickets? It appears it’s big jackpots. Kadish plotted ticket sales with respect to jackpot sizes:

Ticket sales and Powerball jackpots. (Seth Kadish)

Ticket sales and Powerball jackpots. (Seth Kadish)

That means Rhode Islanders aren’t the only ones hoping to hit the jackpot: the people running Powerball are, too

Emergency Manager’s Upcoming Report Caps Long Decline of Atlantic City – By Andrew Soergel March 22, 2015 | 12:01 a.m. EDT

A third of Atlantic City, New Jersey’s casinos closed during a 12-month window as the East Coast gambling market saturates.

The outline of letters that once spelled "Trump Plaza" is still visible on the facade of the former casino on Jan. 14 in Atlantic City, New Jersey. The Trump Plaza is one of four Atlantic City casinos that shut down in 2014.The outline of letters that once spelled “Trump Plaza” is still visible on the facade of the former casino on Jan. 14 in Atlantic City, New Jersey. The Trump Plaza is one of four Atlantic City casinos that shut down in 2014.

An emergency manager’s report on the deteriorating finances of Atlantic City, New Jersey, is expected to be made public as soon as this week – offering the latest indication of the effects that years of falling revenues and rising interstate casino competition have had on the one-time gambling mecca of the East Coast.

Kevin Lavin, appointed by New Jersey Gov. Chris Christie to assess the economic viability of the city, has reportedly prepared recommendations that he has begun sharing with local officials. Details of the rescue plan have been slow to emerge, but the conditions are bleak and some fear a Detroit-style bankruptcy in the city’s future.

With a dwindling property tax base that has seen collections drop by 45 percent since 2008 and municipal taxes that have doubled over the same period, local officials are looking to state aid packages to bolster their finances against an unmistakable decline in the city’s traditional revenue stream. They’re also looking at bringing in less gambling-focused attractions to revitalize the embattled tourist destination that is home to roughly 40,000 residents.

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