A judge is expected to hear different interpretations of how the country's two biggest daily fantasy sports companies operate at a hearing Wednesday on whether the businesses should be allowed to continue operating in New York.
Oral arguments to be made at a hearing before Justice Manuel Mendez in state Supreme Court in Manhattan follow weeks of legal wrangling after Attorney General Eric Schneiderman declared DraftKings and FanDuel illegal gambling operations, sent them cease-and-desist letters and demanded they shut down earlier this month. (Disclosure: CNBC parent Comcast and NBC Sports are investors in FanDuel.)
Since then, New York-based FanDuel has stopped New Yorkers from playing on its site, both companies have complained that payment processors have been pressured to not facilitate hundreds of thousands of New York customers' payments and each has lined up a series of statisticians and game theory experts to assert that daily fantasy sports are games of skill, not chance.
"Relying on a conclusory expression of 'concern' for consumer welfare — with no support from any statistical analysis or studies — the NYAG now seeks to declare DFS to be illegal gambling," write lawyers for Boston-based DraftKings in court papers. "But 'concern' does not empower the Attorney General to unilaterally change the law."
Schneiderman argues that the laws on the issue — a gambling provision of penal law and the state Constitution — are clear: the contests are games of chance that depend on future events that bettors can't control and thus are in violation of the statutes.
"Whether a wager depends on guessing the order of horses in a betting parlay, the number of runs scored in a ballgame, or, as with DFS, the performance of athletes on any given Sunday, there is simply no way to eliminate chance from the contest," he writes in a court filing.
The companies counter that daily fantasy sports contests are not gambling because players pay a fixed entry fee to participate, the prize money is known ahead of time, and compiling a successful roster of players is a highly skilled endeavour that involves more know how than season-long fantasy sports.
Daily fantasy sports have become immensely popular this year after both companies spent millions of dollars on advertisements, pitching the contests to casual sports fans as ways to win big simply by putting together competitive rosters of players.
The companies have drawn the attention of media companies, professional sports teams and other big investors. The companies offer games in most states, though regulators in Nevada and elsewhere have recently restricted their business.
The companies have said they're open to regulations and consumer protections, but argue legislatures should head that effort, not prosecutors.