New York's attorney general on Tuesday ordered the daily fantasy sports companies DraftKings and FanDuel to stop accepting bets in the state, saying their operations amount to illegal gambling.
In a pair of letters sent to the companies, Attorney General Eric Schneiderman said that after a one-month investigation, his office had concluded that the daily contests promoted like a lottery are essentially games of chance, not skill.
He drew a sharp distinction between the operations of daily fantasy sports sites and traditional fantasy leagues, which he said remained legal.
Schneiderman said the daily contests are "neither harmless nor victimless" and carry the same social and economic costs of other forms of gambling. In a separate statement, he accused the companies of being "leaders of a massive, multibillion-dollar scheme intended to evade the law and fleece sports fans across the country."
New York-based FanDuel insisted in a statement that its games are legal.
"This is a politician telling hundreds of thousands of New Yorkers they are not allowed to play a game they love and share with friends, family, co-workers and players across the country," it said. "The game has been played -; legally -; in New York for years and years, but after the attorney general realized he could now get himself some press coverage, he decided a game that has been around for a long, long time is suddenly now not legal."
Boston-based DraftKings said in a statement that it was disappointed in Schneiderman's action, "particularly since he did not take any time to understand our business or why daily fantasy sports are clearly a game of skill." It said the company would "vigorously pursue all legal options available to ensure our over half a million customers in New York state can continue to play the fantasy sports games they love."
Daily fantasy sports have become increasingly popular, with DraftKings and FanDuel blanketing the Internet and TV ahead of and during the 2015 NFL season with ads promising casual fans the opportunity to win big money playing in tournaments against other sports buffs who meticulously track player statistics.
The sites have come under increased scrutiny since it was revealed last month that a midlevel DraftKings employee playing fantasy football beat more than 200,000 other players, winning $350,000 on rival FanDuel. The case raised questions about insider trading after game data not publicly accessible was inadvertently posted online.
The companies have said their employees didn't appear to violate industry rules but launched internal probes and barred their workers from playing on rival websites.
News of that episode prompted Schneiderman to ask the companies to turn over information.
Nevada regulators ordered the sites to shut down on Oct. 15, ruling that they couldn't operate in the state without a gambling license. States including Pennsylvania, Massachusetts and Georgia have considered enacting their own rules.