Daily fantasy sports site FanDuel will stop accepting new deposits in New York as of Friday, yielding to an order by the state attorney general amid what could become a prolonged legal battle.
Earlier in the day, hundreds of people gathered outside New York Attorney General Eric Schneiderman's Manhattan office, demanding he allow daily fantasy sports to operate in the state.
At the event led by FanDuel, protesters held signs reading "Bench Schneiderman this week" and "Schneiderman should focus on real problems." The crowd included roughly 100 employees of FanDuel, with some of them handing out doughnuts and neon green T-shirts as the protesters chanted, "Let us play!"
On Tuesday, Schneiderman ordered FanDuel and DraftKings, the two largest daily fantasy sports operators, to stop accepting wagers in the state. Schneiderman's office concluded the games are "illegal gambling," arguing players bet on events out of their "control or influence."
In the multibillion-dollar industry, users pay an entry fee to pick a lineup of athletes, and can win money based on their performance in real games. FanDuel and DraftKings, which continue to operate legally in most states, contend daily fantasy takes skill and should not be classified with online poker or traditional sports betting.
Both companies took legal action against Schneiderman this week, looking to reverse the ban in state court. In a statement Friday, Schneiderman's office said that "because both companies have refused to follow the law in our state, we will take action to enforce state law."
With its decision to stop accepting wagers, FanDuel noted weekend contests would run as scheduled and users in the state would be able to withdraw their money. DraftKings continues to operate in New York.
Some daily fantasy players at the rally, crowded within a police barricade, contended that Schneiderman overstepped by banning a skill-based game.
"It's absolutely a game of skill. If it wasn't, I'd be winning a lot more," said Desirae Schneider, a 29-year-old clad in a Chicago Bears jersey.
While they disagreed with New York's gambling designation, Schneider and other players argued the largely unregulated industry should have tougher oversight. Daily fantasy operators recently pledged more transparency after a DraftKings employee with access to confidential information faced scrutiny for winning $350,000 in a FanDuel competition.
"Right now, I feel like it's more of an oversight issue. I certainly don't disagree with people who say there needs to be more regulation," said Matt Moody, a 20-year-old student who puts about $50 per week on fantasy sports.
Still, others questioned daily fantasy's importance as a political issue. One passerby remarked, "These are not real problems. This is ridiculous."
Satirical news program "The Daily Show" also came to lampoon the rally. Correspondent Hasan Minhaj joined in with protesters, waving a sign that read "Bro!"
FanDuel stressed the event was meant to represent users who could no longer play if Schneiderman's ban is upheld. Co-founder Tom Griffiths told CNBC that daily fantasy is a "harmless pastime" that hundreds of thousands of people enjoy.
— CNBC's Jessica Golden and Eric Chemi contributed to this report.
Disclosure: Comcast and NBC are investors in FanDuel.