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Fantasy Sports - Down but not out

December 13, 2015

     On December 11, 2015, Justice Manuel J. Mendez ruled on the New York Attorney General's motions for injunctive relief to bar FanDuel, Inc. and DraftKings, Inc. from offering daily fantasy sports to New York residents.  FanDuel Order (linked at Mega.nz) and DraftKings Order (linked at Mega.nz). 

     On a motion for injunctive relief, the NYAG needed to show that (1) it was likely to succeed on the merits, (2) irreparable injury absent the injunction, and (3) that the balance of equities favors the NYAG.  Unlike most motions for preliminary injunctions that try to maintain the status quo, these motions sought to stop the defendants business.  In any case, the grant of a motion for injunctive relief is not typical and should not be given unless it is necessary.  

     Justice Mendez found that the NYAG established that it was likely to succeed under its claim for injunctive relief for repeated fraudulent conduct or illegality (Executive Law § 63), and for violations of consumer protection provisions (General Business Law §§ 349 and 350). Order at page 9, linked from Mega.co.nz.  Justice Mendez also found that the NYAG had even a greater likelihood of success under its claims that daily fantasy sports are illegal gambling (New York State Constitution Article I, § 9 and Penal Law § 225.00).  Order at page 9.

    Some key preliminary findings by Justice Mendez were that (1) Penal Law § 225.00 refers to a person "risk[ing] something of value" and not a wager or bet, and (2) the Federal Unlawful Internet Gambling Enforcement Act of 2006 does not apply because the Act does not apply to transactions that are within a single State.  Order at page 7.

    Thus, Justice Mendez granted the NYAG's motions for injunctive relief.  With that order, both FanDuel and DraftKings would have to terminate any dealings with New York consumers (FanDuel previously stopped accepting money from New York consumers in November).  However, shortly after Justice Mendez granted the NYAG's motions, FanDuel appealed to the New York Supreme Court's Appellate Division and an interim stay order was granted and along with an order expediting briefing.  Stay Order at page 3. 

     So where do these Court actions leave FanDuel and DraftKings?  There will be an expedited briefing and hearing at the appellate level on Justice Mendez's Order.  Following that decision, the case will return to Justice Mendez for discovery.  It is important to note that a decision on a motion for injunctive relief does not affect the ultimate legal determination. 

 

 

updated on 12/17 revised last paragraph

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