New York Attorney General Is Investigating Yahoo’s Daily Fantasy Sports Activity

Last updated on November 2nd, 2018

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The New York Attorney General has added Yahoo! to the list of daily fantasy sports services he is investigating. Eric Schneiderman vowed to investigate the DFS industry in the wake of the Ethan Haskell draft percentage scandal, in which a DraftKings employee was accused of using his company’s statistics to gain an advantage when entering a FanDuel contest. He called for FanDuel and DraftKings to turn over the information of which employees saw draft stats on their daily and weekly contests.

After a month of probing the industry, Schneiderman announced daily fantasy sports was illegal in New York. He gave the DraftKings and FanDuel, which combined control about 90% of the DFS industry in the United States, a 5-day ultimatum to cease and desist activities in his state.

DraftKings and FanDuel Restraining Orders

The two companies filed restraining orders with the New York Supreme Court, but those orders were denied by a judge earlier this week. DK and FD complied with Schneiderman’s order, followed by other US competitors, like Boston-based Mondogoal.

Now, it appears the New York AG is targeting Yahoo Fantasy Sports Daily, a subsidiary of the world’s third-largest Internet search engine, Yahoo. Yahoo launched a DFS service in the summer of 2015 with the intention of competing with DraftKings and FanDuel.

Yahoo Fantasy Sports Daily

In launching their DFS product, Yahoo was attempting to parlay their community of 5.6 million fantasy sports owners into a viable business. Yahoo Fantasy Sports has been a top provider of league management services, player news updates, and analysis for the past 15 years. It made sense that a certain percentage of those 5,000,000+ users might want to play DFS on Yahoo!, so the company launched a service free of affiliate ads and ubiquitious TV commercials.

The launch could not have come at a worse time. Only months after the service began, Yahoo finds itself in the middle of investigations and scandals. When a reporter for ESPN asked for a comment from the company, which has an Alexa rank of 5, a spokesperson said, “Yahoo does not comment on legal matters. We are monitoring industry trends and events closely and believe that we offer a lawful product for our daily fantasy sports users.”

Schneiderman Files Injunction in NY Supreme Court

Meanwhile, Eric Schneiderman continues to turn the screw. On Tuesday, he filed an injunction in the New York Supreme Court calling for DraftKings and FanDuel to stop accepting payments from New York residents. In a response, FanDuel announced to its New York customers that it was temporarily prohibiting them from playing for real money on their site.

DFS Companies’ Reactions

The fantasy sports company released a statement in regards to the decision which stated, “We maintain, unequivocally, that FanDuel has always complied with state and federal law. We look forward to vindicating our position in court next week. We will press on and fight to ensure that your right to play fantasy sports is protected, not just in New York but across the nation.”

DraftKings did not comply with Schneiderman’s demands. Instead, it had not changed its operations in New York State by the end of Tuesday. One reason DraftKings might be taking a different tack is placement. DraftKings is headquartered in Boston, and the Massachusetts Gaming Commission has already stated it does not see daily fantasy sports as being in its purview. FanDuel, a Scottish company, has its US offices in New York City, so it is at significantly greater risk of a raid and shutdown, if it refused to comply.

November 25 Hearing to Decide the Law

Referring to a November 25th hearing where a state judge will decide on the future of daily fantasy sports in New York (for now), DraftKings said in a press statement, “We look forward to being afforded a full and fair opportunity to demonstrate why daily fantasy sports are legal under New York State law.”

Like the FanDuel press release, DraftKings continued to dispute Eric Schneiderman’s interpretation of the law. The statement referred to the contention by the AG that all fantasy sports is gambling and therefore illegal in New York, when it said, “We believe the Attorney General’s view of this issue is based on an incomplete understanding of the facts about how our business operates and a fundamental misinterpretation and misapplication of the law.”

DraftKings Announces Self-Exclusion Policy

For its part, DraftKings quietly announced a new policy this week, which no doubt is meant to help in the coming public relations and legal battles. It announced a self-exclusion policy similar to the self-ban laws for New Jersey and Pennsylvania gamblers. The policy allows players on their site to suspend their account between 3 months and 5 years. Any attempt to use real money to play on the site would be banned, if a person self-excluded themselves.

Such policies have been passed by states in the US and countries worldwide to help problem gamblers manage their issues a little better. The idea is a gambling addict does not want to bet their family’s income on games they know they’re likely to lose, so they can self-exclude themselves in their more contemplative moments, before the adrenaline rush kicks in. The DraftKings self-exclusion policy should help shield the company from charges that their service leads to problem gaming.