Fantasy sports operator FanDuel says it will be mounting a “legal challenge” to New York Atty. Gen. Eric Schneiderman’s demand that it and DraftKings cease operating in the state. However, the company later clarified that it was not ready to go to court but rather will start with meetings to try to convince Schneiderman of its position.
Under law, if the company can show it is a game of skill rather than one of chance, it should be able to operate. In New York, in making the gambling evaluation, the state uses what’s known as the “material element test” which examines whether chance plays a consequential role in determining the outcome of a game. Even if skill is involved, the contest can still be classified as gambling. Other states use different tests.
The company says it has five days and in that time, it plans to meet with Schneiderman to try to get him to change his mind.
The legality of FanDuel and DraftKings is important to the tens of millions who assemble rosters of athletes and aim to win money as well as to some of the biggest companies .
Twenty-First Century Fox for example owns more than 10 percent of DraftKings after investing approximately $150 million into the company in July. DraftKings has also committed to $250 million in advertising on Fox through 2017, according to a recent filing with the SEC.
Disney reportedly explored a similar equity deal this past summer before backing off in the due diligence stage for unspecified reasons. But ESPN is still accepting a ton of ad money as evidenced by a barrage of commercials and brand integrations that its viewers see each weekend when professional football games are played.
Other entertainment companies with stakes in FanDuel reportedly include Time Warner, Comcast and Google.