DraftKings, FanDuel Legal Battle Update: Payment Processor Drops Daily Fantasy Services, New York Times Reports

UPDATE: 6:25 p.m. EST — DraftKings responded to reports that Vantiv Entertainment Solutions had dropped it as a client: "We are not aware of what Vantiv may or may not have told other industry participants about its plans," the company wrote in a statement. "However, to be clear, first, Vantiv has not told DraftKings that it plans to cease fulfilling its contractual obligations as of 'Feb 29, 2016' (or any other date). Second, Vantiv is under court order to continue to fulfill its contractual obligation to DraftKings."

The statement from DraftKings was attributed to David Boies, counsel to DraftKings and chairman of Boies, Schiller & Flexner LLP.

Original story:

The daily fantasy sports industry took a major hit when a payment processing company said it would no longer handle wagers and payouts for the services, according to a New York Times report Friday. The company, Vantiv Entertainment Solutions, reportedly told its clients that it was quitting the daily fantasy business altogether and would "suspend all processing for payment transactions” in the U.S. starting Feb. 29.

The Times said it obtained a letter written by Vantiv.com's Jonathan Ellman, and that daily fantasy giants FanDuel and DraftKings were among the company's clients. Daily fantasy services do not directly handle players' deposits and withdrawals, instead leaving them to third parties like Vantiv.

"As you are aware, an increasing number of state attorneys general have determined that daily fantasy sports (‘D.F.S.’) constitute illegal gambling," Ellman wrote, according to the Times. "Although in recent weeks D.F.S. operators have raised numerous arguments to the contrary, to date those arguments have been unsuccessful and/or rejected."

The attorneys general of New York, Hawaii, Illinois, Nevada, Texas, Vermont and, most recently, Mississippi, have issued advisory opinions against daily fantasy sports, stating that it constitutes gambling, according to Legal Sports Report. Mississippi Attorney General Jim Hood issued his opinion that daily fantasy sports was gambling just minutes before the Times published its report. "Fantasy sports wagering is illegal in the state of Mississippi under current law both on a licensed gaming floor and outside of a licensed gaming floor. Any change to the law would be a matter within the purview of the Legislature," read the opinion written by Deputy Attorney General Michael Lanford.

It is not yet clear how much of the total daily fantasy industry payments Vantiv processes, and the company said it would remain open to returning to the daily fantasy industry, according to the Times.

The daily fantasy industry has been mired in controversy after an October scandal that involved a DraftKings employee unintentionally leaking confidential data the same week he won $350,000 playing a contest on FanDuel.

Read the full New York Times report here.