Complaint - FILED
Complaint - FILED
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A10736 Text:
IN ASSEMBLY
June 14, ?.016
Introduced
by COMMITTEE ON RULES --
(at request of M. of A.
Pretlm~)
St~ta
Of New
Yo~k,
~ep~e$ented
in Senate and
Assem-
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1400.
Legislative findings and purpose. 1. The legislature hereby
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(a\ Interactive fantasy sports are not games of chance because they
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22 fantasy or simulation sports tel'lll'ls are selected baeed Upon the skill and
2J knowledge of the participants and not bassd on the currant ~etl\berRhip of
an actual tea:m that ia a :member of an amateur o-r professional sports
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(b) Interactive fantasy sports contests are not wage.rs on future
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27 contingent events not under the con.te~tants' control or infl.uence
28 because contestants have contl.ol over whi.c}l players they choose and the
29 outooma of aaoh oonte$t is not dependent upon the perfo:i.'tllano~ of any one
30 playe~ or any one aot~al tea.fl\, Tho outcome of any fantasy sports contest
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A. 10736
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does not oori:;espond to the olitcome 0 liny one aportinq ev.;.nt.. Instead,
the outcome deeeru.:ls on how the performances of participants' fantasy
roster choices ool'!I)?are to the performance of others' roster choices,
2. Based on the findings in aubdivision one of this section, the
legislature declares that interactive fantasy sports do not constitute
gambling in New York state as definad in article two hundred twenty-fivl'!;
o-f the penal law,
3, The leqisJ.:;i.tux!'! fu:i;the:i;- fihds that as the internet.: has bE!oome an
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anfoxoem6!'nt and regulatory et:i:-uctura must bagin from the bedxook premise.
that participation in a lawful and license1_J:nteractive fantasy sports
.industry is a privileqa and not a right, and that :i:-egulatory ov-arsiqht
is intended to safeguard thto integrity of the games and pa::r:ticipa.nts and
to ensure aooounta.bility and the public trust.
1401,
Pefinitions, As used in thi:ii a:i;"tioJ.e, the following terms
sh<ill have the following :meanings:
l, ".l\ut::horiz:ed player" shall I(lean tl.n individual located in New York
state, who is not a prohibited player, th~t participates in an interactive fantasy sports contest oered hy a registrant,
2. "Colleqiate sport or at:h.latic ev.,;;nt" shall. mean a sport er athJ.etio
event offered oi: sponsored by o:r:: played in oonneoticn with a puh.1.ic or
private in~titution that offers education services beyond the secondary
level.
-,-,-"Commission" shall mean the Naw York state gaming commission.
4. "Entry fee" shaJ).. mean cash er cash ecruivalent that i"' paid by an
authori:i;ed p.layer to an operator or reqistr1;111t to pa.r:tioipate ~n an
interactive fantasy sports contest offered by such operator or registr ant,
5. "High achool sport or athli:itio eventl shall mean a sport oi: athletic event offered or sponsored by or played in oonnection with a public
or private institution that offers education services at the seoondary
level.
-,-,-,,U~.ghJ y experienced player" sha1.l 11\eah an authori20ed player who
ha$:
~) entered more than one thousand ~onteats offered by a single oparator or registrant; or
(b) won more. than th:t:ea pJ:"izea v;;i.lued at one thousand dollars each ox
mare f:i:om a single operator or registrant,
7.
"Horse racing avant" bhall mean any sport or athletic avant
conduoted .:Ln New York state subject to th11o i:rroviroiona o;f artiol;g~-t'WQ7
three, !;our, five,
six, nine, ten and eleven of this chapter, or any
a):lort or athletic event conduated out.side of i:l"e.w York a-tate, which if
conducted in New York state would be 1>Ubiect to the provisions of th:ls
chapter":'"
8. "J;nteractive .(antasy aporta conte.Bt11 or "conteatn shell m,..-;i.n a game
of skill wherein on~ or mora contestants oo)llpate against Gach oth,,.:r: bv
using their knowledge and underutanding of athletic events and ~thletes
to eeleot and manage rosters of simulated players whose performance
directly coxreaponds with the actual performance of human competitors on
sports te:ii.1ns $-nd in sports events.
0.
"lnte"I::aotive fantasy sports qro.!ls reveriue" shall mean the amount
egual to the total of all entry feas not attributable to New York state
prohibited sports events th~t a registrant collects from all players,
less the total of a11 avros not attributable to New York state prohibited
sports events paid out as winnings to all players, multiplied by the
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A. 10736
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resident pel;'.oentage foI." New York state; proviO-ad, however that the
total of all awns paid. out as winnl..ngs to pl<iyoi::s .tihall not include the
oash
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Prize.
10, "Interactive fantasy sports operator" or "operator" shal;!,_~<1n any
person or entity that offers any interactive fantasy sports contest to
any authorized player through any interaotive fantasy spoi:-ts platform.
11. "Interactive fantasy sports platform" or "p.latorm" shall mean the
combination of hardware, software, and data networks used to manage,
administer, or control contests and any associated entry fees,
12. "Interactive fantasy sports registL"ant" or "registrant" shal.l maan
an operatoL' that is registered by the commission, A registrant may
util.i~e multiple interaotive fantasy sports platforms and of.fa~ multiple
oontests, provided that eaoh platform and each contest has been reviewed
and approved by the coromis.sion,
1-3. "Minor" shall me.an any person under the age of E!ighteen yaars,
14, "J?rohibited playGr" shall maan:
(a) any m"'mbP.r, o:ffi,m;rr;-, employee or ag~nt ot: an
operator or rogi-'Jtrant;
~ any spouse, child, brother, sister or parent residing as a member
of the sama household in the principal plaoe of abode of any meu1ber,
2.fE}.:~}'1 employee or asent of an operator Or registrant/
(c) any individual With aocesa to non-public confidential information
about contests;
(d) any amateur or professional. athlate whose pe.rormance may be used
to deter.mine the outcome of e contest;
(B) anv sports agent, teei.m E!l!lploya.e, refet'ee, or leaffil<;'I oioial associated wit"h any sport or. athletic event on whioh oontesti; are base.d;
(fl any individual located in a et.ate where the conduct of r;Jont.<i><1t-'> ia
expressly erohibited; or
(g) any minor,
15. "Prohibite<:i snorts avent" shall mean any collegiate sport or
athletio event, any higl). schoo;I.. sport ol::" atO.letio event or ;;i.ny horae
racing event,
~'.'...~~sident
pa:i:centage" shall mean, t:o:i: each interactive. fantasy
sports contest, the percentage, :i:ounded to the. nea:i:est tenth of a
percent, of the total entry fees col.lected from playe.rs l.ocate.d in N~
York state, divided hy the total entry fees oolleoted from all players
in interactive fantasy sports contests not prohibited in New York state,
.1.7. 11 Sports event 1' shall mean any amateur o:i: professional sport or
athletic evant, e:itoiapt a prohihited sports event,
1402. Registration. 1. [11) No operator sha.:tl actminister, manage,
or
otherwise make avail.able an int..:i:aotive fanta.sy sports plat-fo:cm to
persons located in New York state unless registered with the oommtesion
pursuant to section fou:i:teen hundred three of this artiol.e, A registrant
may use multiple intera.otive fantasy sports pl.atforms and offer multipl.e
tvPes of contests, provided that eao:h piatfor1t1 and each type of contest
ha11 been reviewed anQ aPProved by the cororrd.ssion, Thi$ <1-rtiole, and any
and all :cul.,.s and rami.lations adoptod undo.I:" tha a-uthority of this artidl.e, shall apply only to interactive fantasy aper.ts oont4'!ata fol::' wl).ich
an authorized player pays an ent:ry fee.
(b) Any operator that was offering contests to persons located in New
York J>tate prior to the tenth of November, two thousand fifteen, may
continue to offer contests to persons located in New York state until
such operatorts application for regiat:i:ation has been approved or denied
in aoco:i:danoe wi.th section fourteen h\lnd.red three of this article,
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A, 10736
.subdivision two of thi1> section and filea an aEPl.ioation for ragistration witn the aoxrirni.ssion within ninety days of the promulgation of regu-
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temporary
permit
pursuant
to
The
oommiasion
shall provide
~temporary
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A. 10736
of
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investigation.
u~on
raoaiPt
of
Cl.'i1~nal
1,1al' a
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A. 10736
(il if a r{;)gi.,trant becomes en: ill made a-ware that a minor has partio;lpated in ona of its oontootll, such registrant sha1-J,. promptly, within no
than two business days, refund any deposit received from the minor,
whethar or not the minor l:i~a engaged in or attempted to engage in a
contest; provided, hO\fever, that any refund may be ofset by arw priiz;oe
already awarded;
(ii) each registt"ant !!hO\ll publish
and facilitate parental control
proaedur0ca to allow parents or ouardians to exclude minors from access
to any contest or platform, Such procedures shall include a toll-free
ntunber to oall for help in estahlishinq such parental oont.t'ol11 I and
(iii)
each reqistr:;Lnt shall take appropriate atapa to oonfirm that- an
individual opening an account is not a minor.
(c) when reerenoinq the ohanoas or likelihood of winninq *n advartiaements or upon contest entry, make clear and oonapiauous. statements
that are not inaocurate o:t: miBleadinq concerning tha chances of winning
and the number of winner$;
(d) enable aut!J.ori11<ed players to exclude themselvei:i frotn oonl.:ei>C.'11 and
take reasonablE!- s tepa to prevent s1.1oh players :tom enta:id.ng a contest
fr.om which they have excluded themselves;
(el
permit any authori:i:ct;id player to perl'l\ansntly close an account
regietered to euoh player, on any and all platforms euppo:rte.d by such
operator or reqietrant, at any time and for any reason,
(f)
offer introducto:ry procedures for authori,.ed player El, that shall
bGI prom.J.nentlv displayed on the main page of r;uoh opl'O;rator or req:r.strant' e platform, that explain oontet.1t play <>nd how to identify a highly
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experienced player;
lg) identify all highly experienced play'2_rs in any oontest by a synibol
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A. 1073 6
is:l
en:.iure
Eerformanoe
event; and
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event,
~r)
no
winnj,_r:i.si:
outcome
ens1.lre
no
on any
or
sin)Ile
athletic
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fifty
entries
maximllnl.
of
one
hundred
entri~s
~hichever
is
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able steps to preven.t autho.rizad players from suPmittinq more than the
allowable number of entries per contest. The oommisaion shall prom1:1l~
gate regulations tQ fm:-ther effectuate thil! subdivision to ensure th<lt
the nUIYII:.>ar of entries s\lbmitted by a sinqle authorized player for any
contest will lead to a fair and eqi?-itable dist:t:-ibution of number of
entries,
~Operators shall not diraotly or indireotly operate, promote, or
advertise any platform or oonteat to persons located in New York stute
unless registered pursuant. to this articl.e,
(b} Unless otherwise approved .by regulation of the oormnission, operators and registrants shall not directly or indirectly promote or adver~
tise any onl:i.ne fantasy or simulation sports games or Contests with an
entry fee d\l1:inq the conduot of anv online antasy or simulation sports
games or QOnb;.osts without an eontry fee. This pat-o.graph shall not ayply
to omy operator or registrant that prohibits prohibited players from
partiaipatinq in online -fantasy or aimt1lation sports qame!I or oontesta
without an entry ee,
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Re2istrants shall not offer anv contest based on any prohibited
sports event,
5, .Registrants shall not permit any minol." er prohibited participant to
miter any contest.
6, Advertisements for contests and prit<Hr offered by ~ registrant
shall not target prohibited partioipants, minors,
or self-excluded
persons. Representations or implications about average winnings :from
contests shall not b~ unfair o~ misleading. Such representations shall
inolude, at a minimum:
(a) th.a median and mean net winnings o:I': all authorized players partioipating in contests offered by such raqistrant1 and
{b) the percentage of winnings awarded by the registrant to highly
axperienoed players participating in oontests offered by suoh registrant
within the preceding oalendai:: vaar.
7. Regiatrants shall prohihi t the use of third-party scripts or
scripting programs for any oontest and ansurA that measures are in place
to deter, detect and, to the extent reaeonabl.y POssibl.e, prevent ohaating, incl.uding collusion, o.nd the use of cheating devices, .including- 1u;u;i
i;i:f software prc;iqratni; that submit entry :fees or adi1.1st the athlete a
sel.ected by an authorized player.
8, Operators and r.i;ogistrants sbalJ. ds-v-elop and prondnently display
procedure.s on the main page of such opsrator' s o?.' registrant's platform
for the filing of a complaint by the authorizgd player against $Uoh
registrant. An initial respol'lse shall. he given by euoh regii;itrant to
such pl?-yar filing the comolaint within forty-eisht hours, A complete
rasponse shal.l be given by such raqiatrant tc auoh player filing the
complaint within ten business days.
An authorized plP..yer may :file
;i
complaint ,;J.leginq a vio.latiort of t!ie provisions of this artiole with
the ooituuission,
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A. 10736
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article as the commission ~ay deem necesthe developll'lent of the initi<'l form of the
Such regulations shall provide for the
of contests in New ~erk at.ate and shall
10736
!\,,
!_ater than one hundred eiqbty days after the deadline for the subm.i.ssiori
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subdivi~ion
Hor the privilege of oonduotinq interactive fantasports Oontesta in the state, regist~ants shall pay a tax eqUivalent
Additional
reg~latory
EXHIBITB
DECISION AND ORDER DATED DECEMBER 11, 2015 BY SUPREME COURT,
NEW YORK COUNTY (Mendez, J.)
People v. FanDuel (Index No. 453056/2015).
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. . SUPREME
COURT
OF THE
STATE OFNEW YORK
-- NEW YORK
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G~UNTY
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PRESENT:
PART
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Justice
THE PEOPLE OF.THE STATE OF NEW YORK. By
ERl.C 'f; SCHN.EIDERMAN, .Attorm>y c>eQeral qf th~
.,,. .
Plaintiff.,
. . ,l39ainst
FANDOEL, INC:, .
Defendant.
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T-h~ tdut.Wlrtg ~apers, nui:nbet&d 1 t~~ .~are-read orr this :mo~ion to(for 1ri1urlritive reHef:.
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~: PAP~~-~::BEREO ;.
. cross .mottqn
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Replylng Affidavits
Cross-Motion :
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Yes
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No
. Upon a reading of the foregoing cited'papers it.isOrdered that the .motion by Eric ..
T. Schneiderman, in his official capacity as Attorney Gener.al of the State of New York,
for an order seeking. injunctive relief, enjoining and restraining Fan duel, Inc, from doing
business in the State of New York; and from accepting en~ry fees, wagers or bets from
New York consumers in regards to any competition, game or conte$t run on def1;mdant's
Seqlienc~;OOl,
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Fariduel, Inc. and Draftkings, Inc;, are online Daily Fantasy Sports (OFS) companiei
th!lt operate websites, Oh October 6, 2015, the O.ffice of the New York Attorney
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Fanduel, Inc. andDrattklngs, Inc., relatetl to allegations th;it employees of the competi~g
ci>rhpany. websites utilii:ed inside information. t.o improve chances of winning competitions . .
on the .competing sites. As a result of the .investigation the NYAG determined that the
. DFS competitions on Fimc!uel; Inc. and Dr11ftkings, Inc. websites, are in actuality illegal ..
gilrtibllng'dperations. subjectinij the pilbllclfi''thefraudulent perceptions 'thaf the garnes ' .
are Winnable.
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OnNove~ber 10, ~015 the NYAG served a ;,cei!se and ~esist''lett~r: ~n ~oth
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tbatth.ey, :cease and.,deli\i.etdtomillegalty a~cepting. ~geriVin.:n """'' .: ,
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. N4:1wYorkState.in conn4:1ction \Nith 'Daily Fantasy Sports (DFSJ." The NYAG's
ih\iestlgation determined. that DFS.on l'anduel,. Inc. and .oraftkings, Inc,, .results in
. cus,tbrners placing bets on events they c11nnot control 9r influence, ''on the real-game
perforirn;1nce of professional athletes" 11nd thatin reality the entrance fees ere wageri; on
a ~contei;t of chance,n with the results dep(;lf'i(lfn!'J on nwnerous elements .of chance to a
"mate~lal. tlegree." The NYAG also determined that the websites involve the companies
having full and active control with direct. profit from the WagE1ting, they.set p.rizes, control
relevant variables suclias athletes wages, and promote themselv.es IH~e a lottery. DI'S ' '
. on the companies websites w~s deerned to cre11te public health ancj economic concerns
... indudirig'th4:1 equivalent ofgamblin!;J addiction, with advertisements misleading the public
with the lure of easy money while only the top one percent, .typically professiOrial . . ..
g1;1mblers profit. The.NYAG pursu!\nt to General Business .lllw 349- and 350, provided
five days for Fanduel, Inc; and Draftkings, Inc. to show whytheNYAG should not initiate
<1ny . proceedings.
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COP r
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November 16, 2015 thi.s Court deni.ed Draftkings, lnc.'s application for a temporary
restraining prder and reserved its decision i.m the iniu.nctive relief. This Decision <ind
Orde.r 11lso addres.ses Draftkings, lnc.'s motion filed under Index #102014/201
Motion
Sequence oo 1
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The NY AG commericed an action against Fanduel Inc., under index .
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#453056/2015, on. Noveniber l 7, 2015. The complaint .as$erts nh1e c.auses of action
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. and alleges that l}laintiff under the authority of ~xecutive LaW~3I12], is entitled to .. . .
.,.,,,,,,,,",, . .,. -enfein,(heodefen<;lam:s..from illegal anddr11ud~t.>c.6.l')d1:1ctcand".seekefnjuriu~th1wrelief""""' . :. .. ,,
pursuant.to Business Corpqratlc>n Law (BC[) 1303, GenerafBm;iness Law (GBLl 349
.and 350. The NYAG's motion filed under in~e:ii.: # 453056/2015, M(Jtion Sequence 001.
seeks an Order pursuant
Executive Law 63[121 BCL1303. GBL 349 11nd 350, . .. ,
imd CPLR 6301 and 6313 enjoining and restrah:ihig Fandt1el, Inc., from doing business .
in the State of New York asa res.ult of its fraudulellt.a11d illegal practices. The NYAG
also seeks to enjoin the defendant from accepting entry fEies, wagers or bets from Nel!V
York consumers in regards to any competition, game or contest run ori its website.
to
commence~
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. The NYAG
a separate action against braftkings,
l1nder index
#453094/2015, on Novembe:r 17, 2015 asserting nine causes of action making th!l
same<allegations as were asserted against Fanduel, Jnc. The NYA G's. mOtfon filed. under.
index #453054/2015, Motion i:;llquerice 001, seeks an Order granting the same.
injunctive relief against Oraftkings, Inc., as is sought ag.ainst Fan(fliel, Inc..
claims empowerment to sue to enjoin and restrain Fanduel, ln.c. and Dr<1ftkings, Inc, as.
foreign corporations registered in Delaware, and doing business in New York from doing
business in New York as a result of the fraudulent and lilegal acts or practices, .
inj~nctiv:
COPY
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. supra). GBL 350, specifically applie$ to false advertising, qtherwise the standard to
.. est;'lbiish a prima fai:;ie case ls the same as that for a claim,. pursuant to .Gi3L 349~ . ..
(G1)sheriv, Mutual Life Ins. Company of New York, 98 N,Y. 2d 314, 774 N.E. 2d 1 HlO,
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. .. 746 N.Y.S. 2d 858 [20Q2Jl. GBL 350, also requires an allegation of reliance on, or.
knowledge of the defendant's advertlsemeritTNoii:Ui:ieH:r iraaingCo; v: Brilddls
As.sociates,Jnc., 243 A.o: 2cj 107, 675 N;v.s. 2d 5 [1" Oept .. 1998Jf.
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$CL f303, permits the NY.AG to, " .. bring an action Jo enjoin or annul th~ .....
'"' ..,;,, '""'""'"'au~cintv '().f.il :fbi:eign .corj)oratiolllcl'.Mh~Jll!li:a1es <With(rt this,staite ooti1~ry*"lawi-has . '
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dcuie or omitted any act which it don.e by domest.ic .corporation. would be a. cause Jot its .
. dissqluti!iri under section 110t!Attomey!Jeneral's action.for jucjicial dissolution) .. :". . .
(McKinneY''sCon . .laws Annotated; BusinessCorpoi'.atiqn I.aw 1303), BCL 1l 1303, has
bfi)en applled to.. enjoin a foreign corporation from doiilg business in a frat1d1.1lerit or illegal .
manner and the court can gl:ant a decree of forfeiture and annulmeot of the right to do
business in the state of New Ymk (People v. AmericimJce. Co,, 135A,o,1!30, 1;w
N.Y,S: 41 [1'' Oept . 1909JJ. .
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The NYAG argues that the OFS games played on the Fanduel, Jnc. and Draftkings,
Inc. websites constitutes illegal sports gambling as ctefinec:t in the New Yori< State
Constitution Artfole I. 9[1] and under Penal law 425,00:2,25.40, specifically Penal
law 225.Q5, 225.10, 225.15 and 225.20 which are alleged to have been violated.
It is the NYA G's contenti.on that Penal Law sections ~225.00-225.40, appl.Y to the DFS
g11mes played on Fanduel, Inc. and oraftl<ings, lnc.'s websites,.which is "gambling" as .
defined in PenalLaw ~225.00 [2], with each player parti.cipating in a ".conte.stof chance"
as defined in.Penal Law 225.00 [1i. not a game ,of skill'.
New York State.Constitution Article I, 9rti. state~in rel~vant part .... . . .
": ..no lottery or the sale of lottery ticket11. pool-selling, book m~king or ari~
.other kind of gambling. except lotteries operated by the state and the sale
of lottery tickets. in connection therewith EJS may .be authorized and prescribE!d
bY the legislature, t.he .net proceeds. of which sh<!ll be applied exclusively to. .... .
or in aid or support of educatii>n i.ri this state as the legislature may prescrib!), ..
except pari-mutual betting on hon;e races M. may be prescribed bY the
legislature and from whfoh the state :ihall derive a ,reasonable revenue for the
support of government, aricJ except casino gambling .at no more than . . . .
seven facilities as authorized and presqrlbed by the legislature, shall hereafter
be at.ithorized.or allowed within this state; and the legislature shall t>ass
appropriate laws to .Qrevent offenses agafrisfany of the. provisions of this
section:'' tE,mphasis added) (McKinney's .Con, Laws Amiotatl)d, Const. Art ..1,
9(1J). .
.
. '
.
. . . ..
. Th!l provisions of New York State Constitution Article I, 9{1L reflects the public
policy of the State of NewYorkagajnst commerci<!lized gambling. The New York $tate ....
Constitution Article I, 9[1] peqnits the legislature through the relevant sections of the
.Penal Law to re9ulate !!ambling. the statutory provision$ are .subject tq strict construction
arid prohipit unauthorized. activity. Laws aothori:ling gambli,ng should not be extended .by
irnplicatiqn beyond what Is specified by the Legis)ature.{New York Racing Ass'h, Jnc. v ...
Hoblock; 270 A.O. 2d 31, 704 N.Y.S .2d 5~ [I'' ()ept., 2000]}.
. ...
.The definition of "gambling" is founcfin the Penal Law 225.00 [2], which dlifine)i
gambling as when a person, " ... stak13s or risks $Omethingof value upon the outcome of
... , ..
certain 9u1come.u (McKinne(s Con .. Laws Annotated, Penal Law 225.00[2ll. Penal<'
Law 225.00 [61 clefin!ls "something of valu.e as; " ... any form of money or property .. ,
or cfe(iit:~.lovolliihg:::aprivilege of playiog llt'agam or schemewithotirc;hifrge," the
award of a free g13me h_as been h!lld a violatiqn Ofthe Penal Law. The term ''something of
value," is established by the payment of .cash to play, and. the receipt of a cash award;
(Plato's Cave Corp. v. :~tate Liquor Authority,68.NY ld 791 ,498 N.E. 2d 420, 506
~ '"l_:'.~~j.,:::. :~:.'!"&...~2.-G:J.Mi.6. . [_19,a:~-1 ).~ .- :~~~ :'. -'~ ~~-~~-"'~'.~_;:-~:-:~ .:"~:~:~~~-~;~:-~- .~~~~~~%f~~:::::~:';~'~-,~~'.;!~-~'.:\::'.:.: .~"''
It is the NYAG's contention that DFS play~d on FandUE!I, Inc. and D~ahkirigs,
results in customen; placing b!ltslabeled "entrance fees" on events they cannot control
. or influen<;e. relying on the real-game performance. of profi;tssiqnal athletes i to wiri
prii;e, which amounts to gambling as dQfiried in PQrial Law 225.bO [21. The NYAG
clairn11 that tbe "entrancll fee". iii riot retumlld in the event of a loss and be'cause the ..
statute only requires "something of value,~ not requiring that it be classified .as a ''bet or
wager'' the ''.entrance fee" is sufffoient to establish gambling.
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In s~~p~rt
the N~ G's contention, internet screen shpts ar~ subinitted sh~wing .. ,.
the manner in which a potential pFS player may sign,i;Jp for each of the websites. The ,. '
published r!Jleii or. terms of \li>e .for each w!lbsit!l. incliJde stat(!ments of l!lgaiity.arid the..
tinalitY of the roster. Terms of use and rules for each website establish that a player
selects a set number of professional athletes for their DFS team and once the PFS team
ls selected, the players are "locked in!' and the selections may no longer be changed.
Scoring for the. DFS team is ta.Died by Fanduel;Jnc. and Draftl<ings, Inc.; who rely on
_
individual rea-1 game. performances of tlw athletes selected for the DFS team by the onllne
. pl<1yer. The NYAG providi'ld a cop'{ of the DFS sea.ring system for professfonal football
but the scoring systeni varies w\th different types of sports. The terms of use and rules
for each website .state thatpoihts allotted to the OFS team are affected if ttiere is a rain
out, postponement, suspension, or shortened gam!l fof any of the DFS' athletes selected. '' ..
by the player as part o.f the DFS team: The. final tally of a daily or weekly OFS . .
' ..
competition occurs when the final box scores the sporting everits ()f the respective .
'
OF$ team pl11yers have conclude.d.
. .
6t
of
clal~s
"~ntrance
~.Z5 t~
the
fees" abFS player can pay ranges frorri
.
. . The NY AG
$10,600.oO on Draftkings,. lnc:s website 13nd fr.om $1.00 to $10,600.00 on Fanc!uel,
lnc.'s Website . The amounts of the l/ntr.anc.e fee is calculated in p.art on salary capped at .
up to $50,000;00 and on the athletes percehred value. There are multiple types of . .
contests a OFS player may enter including, "head to hE!ad" match:ups involving a DFS
player betting that the line:up they choose will perform better than .those picked by . .
another DFS. player, and "Guaranteed Prize Pools" involving a pool with up to hundreds
of thousand oth(!r players. It is also the f\JYAG's contention that the types of games
played are more lil<e "parlay" bets contii1gent on .combinations of games and. "prop" bets
.relying. on statistics;. than .".contests of slcill." The NYAG submits advertis'e.ments .for
Fanduei, lnc;c and Draftk!ngs, Inc. as proof that they acivertisl.l themselves 11s legal,
operate in a mariner similar to that ot a lottery i arid that they claim competitiOns are
"winnable~' regardless of
the leliel. of skill, With .instant
gratification to DFS . piayers.
.
. .
.
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,
It is the NYAG's contention that both Fariduel. ll)c; arid [)raftkings, Inc. take
.
.l:)etWeen 6.% and mOrll than 14% of the "entry fee" as "commission" on every
.
compe1ition. and eq1:1ates this to the equivalent of a "rak.e" or "vig# charge taken on
wagers by a sports bookie. Their terms.of use on 1;1ntry fees are exactly alike, th~re is no
COPl
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specific set fee or percentage paid as an entry fee; DFS players participate in a contest .
with the .amountdiibited .frorritheir account determined by Fanduel, Inc. a.nd. Draftkings, ..
Irie .. There is nobreakdoi,Vn of fees per type of game, which across different.sports can...
.. . po~entiaUy. result in multiple entry fees paid daily by the. same DfS Player, allowing
. Fanduer;inc, andnraftkihgs, lnc:urptofitfrom everylintrvtee being paid.
.
. . ... Penal law 225.00111 defines '"Conte$t of Chan~e' tr.i mean." ... any contest, .
. .
. game, gaming scheme, or gamin~ deviCe In whichthe outcome depends in a material
""""'""'"''~ ..,;,~.aegr.&.e.iJJWn. an,;ele!WIJ'lt,of.,&!l,ailce, natwith~llt1d~hat<skil.lof.tl1B ru;int~tant.1;.4Jl~ls,~;~';,.~~"
be fa:ctor therein" (emphasis added), (McKinney's C(>n; Laws Annotated, Penaltaw .. ' . , ,.
225.00[1 ]). .
.
. .
<
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The NYAG corit~hds that DFS played on the INebsites 1;1re ,, contests of' ch<1n~e" ' . '.
because althoughthe skill of the contestants is a factor,.the outcome depends
,'
svbstantially on chance and .factors not within. the DFS player's control, including .
whether t'1<:1 athletes chosen are injured; or toe game is "rained oyt." Furthermo.re, opce a
.. te!'lm ii; chosen for a conte.st there is no. means ofphyi;ially altqring the outcome ..
,.
, Fanduel. Inc. and Draftkings, Inc., do not.refute t~~ evidence provided . bY
NYAG, .instead each seeks a preliminary injunction pursuant to C.f'LR 6301 and a . .
. tenmoraty re$trainirig order pursuant to CPLR 6.313. they <1tgue th<1t bFs games as.
played oh their websites <11'.e not illegal Qarriblin{l They cfriim tl:mt DFS .is a" game of skill"
<1nd not a "contest of chimce,"' w.ith DFS pl<1yers acting like t!E1nE1ral m<1n<1gers and r~\ying
on <1 team th<1t do.ei; not exist in reality. They reforto Hi.Jmphrey v, Viacom~ Inc., 2007
WL .17$7648, ahd the Federal Unlawful Internet Gambling Enforcement Act of 2006
. (UIGEA} 31U.s.c . 5362, o3~3, as support for their Ciontention that they have the ..
likelihood of suc.cess because, they argue; DFS is not illegal IJamblirig as defined in the.
l\lewYork Penal Law 225.00.
.
,-..,
. CPLR 6301 grants thir> court the power to i$sue an order directing thi;1t ~ party
be enjoined from performing .an act, or to refrain frqm performing an act which would be
in]Vrious. The jssuance of a preliminary injupction is within the discretion of the trial
cQort. A movarit seeking a stay or injunction; is.rljquired to show, "(l) the likelihood of.
ultimate success .011 the 1111:irits; (2) irrepariible injury to him absent gri;111ting of tha
preliminary injunction; and C3l that a b11Iancing .of the equities favors his position'' (Doe ..
Axeh"od, 73 N;V, 2d 74a, 532 N.E. 2d 1212, 536 N.Y;s. 2d44 [1998Jand l\lobu
Next Door, LLC v. Fine Arts.Housing, Inc,. 4 N.Y. 3d a30; a33 111.E. 2.d 191; aoo.. N.v .s.
2d 4a [2005J).
v.
..
"
. Condominium v. Alden, 178.A.D. 2(;1 121, 576 llLY .$. ~d 859 Ilst Dept., 1991]). The
1ikelihooct of ultimate succe$S onthe merits reqyi~es a prinia fecie showirig of the right to
relieHDiMartini v. ChatJiam Green, Inc., 169 A.D: 2d 689, 575 N.Y..S. 2d 712 [1., DeP.t.. ,
19911). lrrep<1rable inju(y requir.es <1 showing that the.l'e is no other.r.emedy at law, . .
. incll..fding monetary damages, that could adequately cornperi$ate th.e p.arty Se.eking relief
(Z9dk11vitch v .. Feibush, 49 A.D. 3i;! 424, 854 N.Y.S. 2d 373 [1" Dept., 2008]). The
balancing of the equities requires th.e Court to determine the relative prejoqiqe Jo each..
party accruing from a gr;mt or i;lenial of the reque,sted relief .tMav. Lien, Ul8 A;o; 2d
186, 604 N.Y.S. 2d 84 I1"J)ept .. 1993]). CPLR 6313 permits the imposition of a
temporary Restraining Order pending the determination of <1 motion for preliminary.
-6-
copj
.,. .. -
-5
-.
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. injtmction [People
Qept,. ) 97:4]).
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i.~.
. Fanduel, Irie. and Praftkings lnc;, each refer to Hyrnphl'ey v. Viacom, Inc.: 2007 _ .._- ..
----- -- WL-1797648 [b,c.N.J.; 20()]), an_urtreported dech>ion!'romtheNew J.erseY U.S.-_ , "._ - -District Court addressing the New Jersey Qui ram statute lN :J.S.A. 2A:40~ 1 ) per[nitting >
Illegal gambling losers to recover losses. This .case has no appiicatim1 in thisjurisdictkih
and is distirigulshable; The Court in Humphrey v. Viacom, Inc,, granted a motion to .
- ~-~"---~$$""'tlil~laint, and aete~cthat~the.. l*!l/-fl10tlt-~,-an-efltily.,fee>-il'!.~'to . w
participate ih $easonal fantasy sports iS not an illegal "wager" or ;'bet" pursuimt fo the New Jersey Oui Tarn statue. The court in H~mphrey v, Viacom, Inc., stated that_, "entry ..
f~es. do. not constitute bets or. wagers where they are paid -uncc;mditionally for the - - _
privilege of p;irticipatlng in ;i c<:>ntest, atid the prize is for. an amour)t certain that is
guaranteed to be won by one. -of the c1mtestants [but not the entity offering the. prize),.'' .
Humphrey v. Viacom, Inc,., involved seascma! fantasy $ports iri wh,icJl tf:ieplayers paid a
rionrefundable one time entry fee. ContrarY to Humphreyv. Viacom, Inc.,. the fl!cts in'
,
ttils iicti()o inv_olva DFS, the participijnts pay afei:t 0.verytimethey Play, potentially _- _.
multiple times daily instead of one seasonal entry fee, with a percenfage of every entry
.fee bein!J paid to Fanduel-.lnc. <Irid_ D~a~kings, Inc., Furthermore the Ne\'V York State
- ' ',
Pen!JI L<1w does notreferfo "wag!'lring" or "betting," rather itstate5 that a person, "risks ,
$ornething of value.''. The p;iymentof an ''.entry fee" as-high as $10,600.00 on one or -
_
more Qolltests daily could certainly be deeme(i risking "som!l-~hing of value/'. Th~
language of Penal Law 22p~QO iii broadly worded and as currently Written sufficient for
findin!'I that DFS involves illegal gambling.
- ___ ,
Fanduel, Inc. and Draftkings, Inc. refer to the. Federal Ulllawfullnfernet Gambling
Enforcement Act of 2006 (iJIC3F;A) 31UcS.C. 5362; 5363, arguing it carves outan .
exception for. f;inJ;asy Sport$. _UIG~A [1.l{e)[ixJ, Permits participation in;''imy f<;llltasy or
simulation sports game or educational garne Or contest in Which ... no fantasy or .
'
simulation sports team is based on thl'l currEinfmemben!l;i:ip of an actual te;im that is a
membet of an amateur or professior);il spol't$ .organi:c:ation .. .''(31 u.s:c. 93:62 [l][e][ixJl _The UIGEA l<1nguage exempting fantasy sport$ has no c6rresp9Jic:fing authority under _
Nev{ York State law as currently writtim. UlGEAcreates an exceptfon for state statutes,
specjfically stating; "The term 'unlawfolintemet gamblin1t means
place, receive, or
otherwise knowingly tranll.rriit -a. !:>et or wager by rneans which involves the use, at least
in part; of the lnterne1; where such bet or wager ls. unlawful und_er any applicable Federal
or State Law ifl the State or tl'lbal iands in Which the bet or wager is initiated, received or_ otherwise ma_de (ern_phasis added) (31U.S,C. 5362 [2],[10HAJ), The exception found ..
in UIGEA does not apply under the crr.,mt New York State statutory languag_e. UIG_EA _ -_by its own language does not apply to " ... placing, receiving, or otherwise.transmitting a
bet or wager wheie .. [i) the bet or wager is initiated and received or otherwise made
exclw;iVely Within a single State; .. .''(31U.S.C: 5362 [2ll10l!IHDL liill. UIGEA, is not a
basis to find the N'(AG .ex<;eeded its authority or to grant Fanduel, Inc;. and Oraftki!'lgs.
. .
. - - ...
Inc., the injunctive. relief sought.
to
' .
Fanduel, Inc. and Draftklng, lnc.'s Cl!lims of. !aches or estoppel cannot:b~ i~voked _
against a government agency to prevent the discharge of statutoryduties where the acti>
- the agency seeks to prevent coi.dd easily result In extenshie public frad (l'arkview
Associates v; City of New :Yo~k, 71 N.Y. 2d 274 71; S-19 N. _2d 1372, 525 N.Y.S. 2d _
176 [1!;)8aJ and New Yo-rk State Medical Tn:mspo.rters Ass'n,lnc. v. Peralei>, N.; 2d
126, 566 N.E. 2d 134, 564 N.Y.S. 2d 1007 (1990]). The possibility ofei>toppel against
a governmental agency is to be denied, in all but the; "rarest of cases" such as Where,
COP'li
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.en~orced. could.not~ed;scov~red.
, -i!11x;~~:-_._~,,~~f'~>":~-"~.::IVi:' ,.,,.
.
Draftkings, Inc.; has asserted constitutional arguments <;>f violations of clue process
and equal protection in its Order to Shi>w Cause seeking injunctivec relief ... Due process
requires notice and the opportunity to be heard (People v. Appl1;1 Health & $ports Clubs,..
BO N,Y. 2d 803, 599 N.E. 2d 279, 5$7 N.Y.S. 2<1 279 {1992]). The NVAG conducted .
an investigation over the course of a mohtfl and provideq both notice and an opportunity
for Draftkings, Inc. to be heard in the November 10, 201 s. Hcflase and desist letter."
.
oraftkings, Inc. commenced a special procee~ling arid broughfan Order to Shciw Cause
seeking in)unctive relief duririg the periodprovi<led by the NYAG. The due process .
argument fails because Draftkings, Inc. has been providl!<l vvith the oppoftunitY to be.
hear<l by both the NYAG and this. Court. The equal prote.etion argument also fails to
!!Void injunctive relief. Draftkings, Inc. claims that the NYAG is selectively enforcing the
illl)gal gambling provisions of Penal Law ,225.00225.40, solely against DFS as played
on the corporation's website, Dtaftkibgs, Inc. ill requirt!dJo provide evide!)ce that other
DFS. websites or corporations that are "similarly situated" have been exempted by the
NYAG from its investigation and enforcement to establish a .vfolatlon of the equal
protection provisions of the Constitution (DeierEntertainment Concepts, Inc. v. City of.
New York, 8 A.O. 3d 37, 778 N:Y.$. 2q 1 B [1" Dept., 2004)). Draftklngs, Inc. failed to
provide evidence that "similarly situated" DFS websites were exempted from the
.. -
...
engagin~ i~policy
tha~ sho~I~.
decisions.
Draftkings, Inc. claims that the NYAG is
be restricted to the legislature. The separation of powers is implif'ld in each of the three
coordinated branches of government: executive, laaislative. and Judicial. The Legislature's .
powers involve., "making critical policy df'lcisions, while tne executive bran'ch's
-e-
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:_1
legislature, (3) is acting to "fillthe v<1cuum" inan are11Jhel~gisl~tur~ had bee~ una~le to .....
"re<!ch an cimeement on the goals and metf,lods that should govern" <!nd (4) the te.chnicaL
competence necessary to provide details for broadly statf;id legislative policies (Boreali v.
Aicelrod, 71 N.Y. 2d. 1, 517 NJ;. 2d 1350, 523 1\1.Y.S.. 2d 464 [1987)). ihe fo(lr part
.. .. 'test requires proofthafthe sfatiiforyjirovisfons.~ "J1alje riiimeiotijj exemptions;'' there is' . .
. repeated attempts at legislative enactments with failur1;1 t.:i reach an a11reement in the............
legislah1re ;ifter ''substantial public debate and vigorous lobbying," and a showing that
there is no spe.cial expertise or competence of the agency irWolved !Festa v. Leshen, 145 ... ..
. q\'''"""'''"'""'A.,p;...2d . 491 53 7 .~~-s .:'2fl.q47"14f. (i)ept,,,- 'J4ls9tt;yo Oraftldngs; i l'l~t!as !'lot" provilfackallly.""""'''.i""''
proof in support of the contentfons that the NYAG has failed to meet the four part test.
I.he mere asseriforis that the NYAG fails t0 me.et the reqUirenient$ is not enough to avoid
th.e injunctive reliefsollght by ttieNYAG.
. ..' , "',"'.
The NYAG 111 (!pposition to .iha separation of powers ar~time~t, ar~ti1;1~ ~hat the , .
injunctive relief sou.gtJt by braftkings, .Inc, amounts to the e#raoidinary relief of a Writ of
prohibition. "The extraordinary remedy ofa writ of prohibition lies only where 'ther1;1 is <i
cfoar legal right' to such relief, and only when the bodY or officer involved acts or ....
. threatens to act in a n:iartne( qver which he or .she has no jurisdiction or where he or she .
exceeds his or her autlmrb:ed powers,.," (Kimyagarova v, Spitzer, 7g1 N;Y.S. 2d 610 ....
[i Dept.; 2005]}. Dr<1ftkij1gs, lnc/s argument that the NYAG has exceeded its .. .
authority and Q1isinterpreted the. meaning and application of the New York State .
Constltutfon Article I. ~9 and the .Penal Law; does not require that this Court titilb:e the
extraordinary remedy of restraining the NYAG [Morgenthati v. Erlbaum, 5g N;Y. 2d 143.
451I\l.E.2d 150, 464 N.v.s: :2d 3!)2 (1983] and Matter;.ofJohrison v. Price, 28 A.D;.
3d 79, 810 N.Y.s. 2d 133 Cl" Oept., 2006)}.. Draftkingi;; Inc. has not established a ....
clear legal fight to the injunctive relief sought, prohibiting the NYAG from taking
enforcement <1ctiori.
.. .!
The NY~G. has established the li~elihoodof. suc.cess wam~nting injunctive relief ' ....
underthl! authority providetf in Exec\itive Law63[12], to avoid fraudulent or illeg<il acts .
and Violations of GBl -.349 and 350..'The 'NYAG has a greater likelihood of success on .
the merit$ under the New York State Constitution Article I. ~9, and the. definitions of . . ..
gamblh:\g <1nd "contest of chance" as currently stated in Peria! Law 225;00 flJ,[2). The .
NYAG has also es\ablished that both Fanduel; Inc. and ()raftkings, Inc., as out of state
.corporations, can be enjoined-pllrsuant to l3CL 1303,frorri their activities in the Staie of .
Yori<. The NYAG is not requiretf to stiow irrep<1rable harri1 um:ler Executive Law
,.-.
i33[12J,. it. is imP.lie.d inthl) ne.ed to prevent the effects of fraudulent and iliegal conduct
onthl). general public (People v: Af>ple Health .&$ports C!ubs,599 N.Y. 2d 803,. supra).
The balancing of the equities are h:i f<1vor of the NYAG.and the. State of New York due to
their interest in protecting the public,. parth:;ularly those w.ith gambling ;;1ddictions.
Fanduel, Inc .. and praftkiiigs, Inc., are only en)olned and restrained. in the State of New
York, DFS fo permitted in .other states, and the protection of the gen'eral public outweigl1s .
any potentiallosii Of business..
l\lew
fa~du11V Inc. arid Draft~ings: Inc. have not esta~Jished entitlement ~o a preliminary.
injunction, however, a granting or denial of a prellmlnafY injunction .does not constitute a
determination of the ultim<1te issues (Walker Memorial Baptist Church v.. Saunders, 285
N. Y. 4s2..35 N.1;'.. 2d .42 I19411 and Jou-Jou Designs, Inc. v, lntermitiona) Ladi{is
Garment .Workers' Union, Local 23-25, 94 A.D, 2d 395,465 N.Y.S .. 2d 1(13 [1" Dept.;
1983)), Fanduel, Inc. and Draftkings, Inc.) failure.to e$tablish entitlement i:o a
pn~llrninary injunction, is not a finaldeterminatiqn of the merits .and rights of the partie$,
therefore discovery is needed ilfterjoinder of issue~ Therelief sought by Draftkings, Inc,
"9-.
..COPYr
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. in its motion papers filed Under Index Nun'iber 1-02014/2015, Motion Sequehc~ (J01',
seeking. expedited discovery, hearing and trial, is. premature since the.NYAG. and$tate
New York have not had an opport(Jnity to. answer.
.
.
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.
'' .. Accordingly, ltisORDEREDthatthe n'iotion byEriT. Schneiderman;<ih his orndial
capadty.a!) Attorney Gener;;1l of tf1e State. oflilew York, for an Order.pursuant to, . . ''
Executive Law 63[ 12], Business Corporation Law 130 3, General Business Law 349.
and 350,and CPLR s6301 and 6313~ seeking injunctive relief and.a temporary . . . '> .
vr,,;;<:c ..:,.,"""''restraining ordwc;iienjoiflin{jand ~train~tn;luelr:.h:icorfrem doing business irM!fe> Sta:!e.c;,,,/!~;,
of,New York in violation qt the New York State Constitution Article I, (9] and New York
Penal Law 22$.05,s225.10, 225.15 and 225.20, ~ndft6macceptintj entryfees; .. '
wagers or bets from New York. consumers in regarcli; to- l'lnY .competition, gar'ne or
contest run on detend<1nt's website, is granted, and it is turlher,
..
restraine~
';:'/'<
OROERE[), that Fanduel, Irie. slJ<ifl have thirty (30) days from the servic~ of a co~y
of this Order with Notice of En~ry to serve an answer or otherwise move in the
file.d under Index #453056/2015, and itJs (urther, '
"., ..
._, .,-,
>ICtlon
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. further,
in
.
ORDERED, thatbraftking~, Inc. shall have thirty (30) daY!l from the serviceof a f
copy of tl)is Order with Notice of Eritry to serve an answer or ptherwise move iri the .....
action filed underlndex #453064!2015, and.it is further..
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ORDERED, that D~aftklngs, lnc:'s mbtion filed under Index #10to14!20J5, Motion.
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Generalofthe<State Of New York, from taking 11ny enforcement action or other action, . .
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Attorney. General of the St!jte of New York,. shan serve an answer or ott:iei"wise .move in
the prQceeding filed by DraftKings,lnc. under Index# 102014/2015 .within thirty.(30}
days of service of a copy of this Order with Notice of Entry.
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EXHIBITC
NY ATTORNEY GENERAL LETTER DATED 11/10/15 TO FANDUEL
T. SCHNEIDERMAN
ATTOR?\TEY GEl\'ERAL
120 BROADWAY, NEW YORK, NY 10271 PHONE (212) 416-8196 f AX (212) 416-8369 WWW.AG.NY.GOV
We believe there is a critical distinction between DFS and traditional fantasy sports,
which, since their rise to popularity in the 1980s, have been enjoyed and legally played by
millions of New York residents. Typically, participants in traditional fantasy sports conduct a
competitive draft, compete over the course of a long season, and repeatedly adjust their teams.
They play for bragging rights or side wagers, and the Internet sites that host traditional fantasy
sports receive most of their revenue from administrative fees and advertising, rather than
profiting principally from gambling. For those reasons among others, the legality of traditional
fantasy sports has never been seriously questioned in New Yark.
Unlike traditional fantasy sports, the sites hosting DFS are in active and full control of the
wagering: FanDuel and similar sites set the prizes, control relevant variables (such as athlete
"salaries"), and profit directly from the wagering. FanDuel has clear lmowledge and ongoing
active supervision of the DFS wagering it offers. Moreover, unlike traditional fantasy sports,
DFS is designed for instant gratification, stressing easy game play and no long-term strategy.
For these and other reasons, DFS functions in significantly different ways from sites that host
traditional fantasy sports.
Further, FanDuel has promoted, and continues to promote DFS like a lottery,
representing the game to New Yorkers as a path to easy riches that anyone can win. The
FanDuel ads promise: "anybody can play, anybody can succeed"; "Play for real money with
immediate cash payouts ... the money is real!" and similar enticements. Like most gambling
operations, FanDuel's own numbers reveal a far different reality. In practice, DFS is far closer
to poker in this respect: a small number of professional gamblers profit at the expense of casual
players. To date, our investigation has shown that the top one percent of FanDuel' s winners
receive the vast majority of the winnings.
Finally, during the course of our investigation, the New York Attorney General has been
deeply concerned to learn from health and gambling experts that DFS appears to be creating the
same public health and economic problems associated with gambling, particularly for
populations prone to gambling addiction and individuals who are unprepared to sustain losses,
lured by the promise of easy money. Certain structural aspects of DFS make it especially
dangerous, including the quick rate of play, the large jackpots, and the false perception that it is
eminently winnable. Ultimately, it is these types of harms that our Constitution and gambling
laws were intended to prevent in New Yark.
The illegality ofDFS is clear from any reasonable interpretation of our laws, beginning
with the New York State Constitution. The Constitution prohibits gambling in all forms not
specifically authorized:
[E]xcept as hereinafter provided, no lottery or the sale of lottery tickets, poolselling, book-making, or any other kind of gambling, except lotteries operated
by the state ... , except pari-mutuel betting on horse races ... , and except casino
gambling at no more than seven facilities ... shall hereafter be authorized or
allowed within this state; and the legislature shall pass appropriate laws to
120 BROADWAY, NEW YORK, NY 10271 PHONE (212) 416-8196 FAX (212) 416-8369 WWW.AG.NY.GOV
Washington State, which has substantially the same statutory definition of gambling, has reached the same legal
120 BROADWAY, NEW YORK, NY 10271 PHONE (212) 416-8196 FAX (212) 416-8369 WWW.AG.NY.GOV
(d)
With knowledge of the contents thereof, possessing any writing, paper, instrument or
article of a kind commonly used in the operation or promotion of a bookmaking
scheme or enterprise and constituting, reflecting or representing more than five bets
totaling more than five thousand dollars in violation of New York Penal Law
225.20;
(e) With knowledge of the contents thereof, possessing any writing, paper, instrument or
article of a kind commonly used in the operation or promotion of a bookmaking
scheme or enterprise in violation of New York Penal Law 225.15;
(f) Misrepresenting that FanDuel complies with applicable laws; misrepresenting the
likelihood that an ordinary player will win a jackpot; misrepresenting the degree of
skill implicated in the games; and misrepresenting that FanDuel's games are not
considered gambling, in violation of Executive Law 63(12) and GBL 349 and
350; and
(g) Conducting or transacting its business in a persistently fraudulent and illegal manner
in violation ofBCL 1303.
Pursuant to GBL 349 and 350, FanDuel is afforded the opportunity to show orally or
in writing to this Office, within five business days of receipt of this notice, why the Attorney
General should not initiate any proceedings.
Sincerely,
Kathleen McGee
Chief, Internet Bureau
120 BROADWAY, NEW YORK, NY 10271 o PHONE (212) 416-8196 FAX (212) 416-8369 o WWW.AG.NY.GOV
EXHIBITD
NY ATTORNEY GENERAL LETTER DATED 11/10/15 TO DRAFTKINGS
y ORK
T.
SCHNEIDERMAN
ATTORNEY GENERAL
120 BROADWAY, NEW YORK, NY 10271 o Pl!ONE (212) 416-8196 o FAX (212) 416-83690
WWW.AG.NY.GOV
We believe there is a critical distinction between DFS and traditional fantasy sports,
which, since their rise to popularity in the 1980s, have been enjoyed and legally played by
millions of New York residents. Typically, participants in traditional fantasy sports conduct a
competitive draft, compete over the course of a long season, and repeatedly adjust their teams.
They play for bragging rights or side wagers, and the Internet sites that host traditional fantasy
sports receive most of their revenue from administrative fees and advertising, rather than
profiting principally from gambling. For those reasons among others, the legality of traditional
fantasy sports has never been seriously questioned in New York.
Unlike traditional fantasy spmts, the sites hosting DFS are in active and full control of the
wagering: DraftKings and similar sites set the prizes, control relevant variables (such as athlete
"salaries"), and profit directly from the wagering. DraftKings has clear knowledge and ongoing
active supervision of the DFS wagering it offers. Moreover, unlike traditional fantasy sports,
DFS is designed for instant gratification, stressing easy game play and no long-term strategy.
For these and other reasons, DFS functions in significantly different ways from sites that host
traditional fantasy sports.
Further, DraftKings has promoted, and continues to promote DFS like a lottery,
representing the game to New Yorkers as a path to easy riches that anyone can win. The
DraftKings ads promise: "It's the simplest way of winning life-changing piles of cash"; "The
giant check is no myth ... BECOME A MILLIONAIRE!" and similar enticements. Like most
gambling operations, DraftKings' own numbers reveal a far different reality. In practice, DFS is
far closer to poker in this respect: a small number of professional gamblers profit at the expense
of casual players. To date, our investigation has shown that the top one percent of DraftKings'
winners receive the vast majority of the winnings.
Finally, during the course of our investigation, the New York Attorney General has been
deeply concerned to learn from health and gambling experts that DFS appears to be creating the
same public health and economic problems associated with gambling, particularly for
populations prone to gambling addiction and individuals who are unprepared to sustain losses,
lured by the promise of easy money. Certain structural aspects ofDFS make it especially
dangerous, including the quick rate of play, the large jackpots, and the false perception that it is
eminently winnable. Ultimately, it is these types of harms that our Constitution and gambling
laws were intended to prevent in New York.
The illegality ofDFS is clear from any reasonable interpretation of our laws, beginning
with the New York State Constitution. The Constitution prohibits gambling in all forms not
specifically authorized:
[Elxcept as hereinafter provided, no lottery or the sale of lottery tickets, poolselling, book-making, or any other kind of gambling, except lotteries operated
by the state .. ., except pari-mutuel betting on horse races ... , and except casino
gambling at no more than seven facilities ... shall hereafter be authorized or
allowed within this state; and the legislature shall pass appropriate laws to
prevent offenses against any of the provisions of this section.
120BROADWAY, NEW YORK, NY 10271 PHONE (212) 416-8196 OfAX (212) 416-8369
WWW.AG.NY.GOV
Washington State, which has substantially the same statutory definition of gambling, has reached the same legal
conclusions with respect to DFS.
120 BROADWAY, NEW YORK, NV 10271 PHONE (212) 416-8196 FAX (212) 416-8369 o WWW.AG.NY.GOV
(d)
With knowledge of the contents thereof, possessing any writing, paper, instrument or
article of a kind commonly used in the operation or promotion of a bookmaking
scheme or enterprise and constituting, reflecting or representing more than five bets
totaling more than five thousand dollars in violation of New York Penal Law
225.20;
(e)
With knowledge of the contents thereof, possessing any writing, paper, instrument or
article of a kind commonly used in the operation or promotion of a bookmaking
scheme or enterprise in violation of New York Penal Law 225.15;
(f) Misrepresenting that DraftKings complies with applicable laws; misrepresenting the
likelihood that an ordinary player will win a jackpot; misrepresenting the degree of
skill implicated in the games; and misrepresenting that DraftKings' games are not
considered gambling, in violation of Executive Law 63(12) and GBL 349 and
350;and
(g) Conducting or transacting its business in a persistently fraudulent and illegal manner
Sincerely,
Kathleen McGee
Chief, Internet Bureau
120 BROADWAY, NEW YORK, NY 10271 PHONE (212) 416-8196 FAX (212) 416-8369 WWW.AG.NY.GOV