FanDuel Settles With Texas Court, DraftKings Fights On

The daily fantasy sports industry was divided after FanDuel Inc. reached a settlement Friday with Texas Attorney General Ken Paxton to halt paid games in the state, while DraftKings Inc. sought more clarity on the ruling in which Paxton reportedly said that paid daily fantasy sports contests were illegal under Texas law.

DraftKings and FanDuel, two of the largest websites in the business, have come under increased scrutiny from regulators who contend that chance is a dominating element in such games and the games should hence be considered gambling, as opposed to skill-based contests, which is what daily fantasy websites claim them to be.

"We look forward to presenting evidence to demonstrate that Daily Fantasy Sports are skill-based games and perfectly legal under Texas law, certainly no less so than other kinds of skill-based contests,” Randy Mastro, an attorney with Gibson Dunn & Crutcher representing DraftKings, said Friday in a statement, according to Bloomberg.

Meanwhile, FanDuel, which has already stopped its paid games in eight other states, said the company would stop accepting paid entries for cash prizes in Texas from May 2. Friday’s deal allows FanDuel to continue operating its free games in Texas.

"This [settlement] will spare both the company and the taxpayers of Texas the expense of an extensive lawsuit that I believe would only affirm what my office has already determined," Paxton reportedly said in a statement Friday.

The daily fantasy sports industry has been at the center of a growing legal and legislative controversy since New York Attorney General Eric Schneiderman sued FanDuel and DraftKings in November, arguing that daily fantasy sports were a form of gambling, which is illegal in New York.

The argument has even polarized the financial community, with major banks taking sides on the matter. While Bank of America and Citigroup have declined payments to daily fantasy operators from New York customers since December, JPMorgan Chase customers have faced no such limitations.