Judge Orders DraftKings And FanDuel To Cease Operations In New York (UPDATED)

Update: Well that didn’t last long. After the decision, DraftKings filed notice of appeal and an expediated motion to stay the decision, which was approved by a New York judge. The site won’t have to cease operations in New York today, and Daily Fantasy Sports survives another day in New York. Here’s the full statement from DraftKings:

“We are disappointed with the Court’s decision, and have filed a notice of appeal and an expedited motion to stay the Court’s decision, pending our appeal, in order to preserve the status quo. This immediate stay was granted, so we will remain fully operational in New York. – David Boies, counsel to DraftKings

After an expedited injunction hearing November 25th, New York State Supreme Court Judge Manuel Mendez just upheld a cease-and-desist request from New York Attorney General Eric T. Schneiderman, meaning DraftKings and FanDuel must now cease operating in New York.

In his decision, Judge Mendez cites the broadly worded gambling laws in New York State as part of his reasoning:

‘The New York State Penal Law does not refer to ‘wagering’ or ‘betting,’ rather it states that a person [engages in gambling when he] ‘risks something of value.’ The payment of an ‘entry fee’ as high as $10,600 on one or more contests daily could certainly be deemed risking something of value.’ The language of Penal Law  §225.00 is broadly worded and as currently written sufficient for finding that DFS involves illegal gambling. – Judge Manuel Mendez

Importantly, Judge Mendez also cited precedent reminding that “a granting or denial of a preliminary injunction does not constitute a determination of the ultimate issues,” meaning that the legal battle is far from over.

While FanDuel had already temporarily stopped accepting deposits and game entries from New York residents after the original order by Schneiderman, DraftKings had continued to operate, pending this decision.

DraftKings counsel released a statement after the decision, saying they plan to immediately appeal:

“We are disappointed with the Court’s decision, and will immediately file an emergency notice of appeal in order to preserve the status quo. Daily Fantasy Sports contests have been played legally by New Yorkers for the past seven years and we believe this status quo should be maintained while the litigation plays out.” – David Boies, counsel to DraftKings

Meanwhile, AG Schneiderman is pleased with the ruling, saying today in a statement that “I have said from the beginning that my job is to enforce the law, and that is what happened today.”

Today’s decision doesn’t bode well for the future of DFS. While DraftKings and Fanduel’s legal battles are just beginning, other states have been watching this preliminary New York Supreme Court ruling closely, as New York is traditionally a trendsetter when it comes to financial or business regulation.