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DraftKings And FanDuel Lose A Payment Processor

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Update: Title changed to reflect that FanDuel does not use Vantiv for payouts, and offers additional deposit methods besides Vantiv processing. 

Daily Fantasy Sports sites like DraftKings and FanDuel have been dealt another major blow today, but this time it didn’t come from an attorney general or federal court.

Instead, it came from the company that is responsible for processing deposits and withdraws for the millions of players on both sites.

In a letter obtained by the New York Times, Vantiv, a major payment processor in the entertainment space, said it would “suspend all processing for payment transactions” for clients involved in Daily Fantasy Sports, as of February 29th.

The letter to DFS operators references that an “increasing number of state attorneys general have determined that daily fantasy sports (‘D.F.S.’) constitute illegal gambling”.

Essentially, the company is saying that the current legal state of DFS is too vague for them to continue operating in the industry, especially since the Unlawful Internet Gambling Enforcement Act of 2006 places legal liability on payment processors as well as operators of gambling sites.

This means that Vantiv could theoretically be held in contempt by a federal court for processing transactions defined as illegal gambling, even if they were simply processing payments for a site like FanDuel or DraftKings. Interestingly, Vantiv is a public company, and its stock has spiked about 6 percent today. This shows shareholders are likely happy with the decision to exit the risky industry.

Now, both companies have exactly a month to find a new payment processor. However, this will be difficult since traditional payment processors are even more risk-adverse than gaming-focused payment processors like Vantiv.

This scenario draws parallels to the retail Marijuana industry in legalized states like Colorado and Washington, where banks will refuse to work with any industry players for fear of eventual federal prosecution.

Now, it’s a race against the clock for both companies to find a new payment provider before Vantiv suspends its processing on Feb. 29th.

UPDATE: DraftKings has provided us with a statement saying that they haven’t heard anything from Vantiv…so it seems like things are still being worked out between the two companies.

“We are not aware of what Vantiv may or may not have told other industry participants about its plans. However, to be clear, first, Vantiv has not told DraftKings that it plans to cease fulfilling its contractual obligations as of “Feb 29, 2016” (or any other date).  Second, Vantiv is under court order to continue to fulfill its contractual obligation to DraftKings.” – David Boies, Counsel to DraftKings and Chairman, Boies, Schiller & Flexner LLP: