New York Daily Fantasy Update: No DraftKings, FanDuel Decision Yet, Will Come 'Very Soon'

A New York State Supreme Court judge reserved decision Wednesday on a request for a preliminary injunction from state Attorney General Eric Schneiderman that would effectively ban daily fantasy sports giants DraftKings and FanDuel in the Empire State pending a larger trial deciding the legality of their services. Justice Manuel Mendez said his decision would be coming "very soon," which is expected to be within the next one to two weeks, according to reports.

New York has become a major battleground for the daily fantasy industry, and the challenge from Schneiderman has been a significant hurdle for the major operators. The state is home to about 12.8 percent of the daily fantasy market, so getting shut out from the state -- even temporarily -- would be a major loss. It could also be months before a trial begins. Once the trial does start, it could prove to be a lengthy ordeal. David Boies, attorney for DraftKings, previously said that shutting down the company's New York contests would be “a disaster,” according to the Boston Globe.

The hearing Wednesday was not for a final decision on the legality of daily fantasy sports in the state. Rather, DraftKings and FanDuel sought a court order that would prevent the state from shutting down their contests prior to a final ruling on their legality. Schneiderman, who had previously ordered daily fantasy sports operators to stop accepting illegal "wagers" in the state, saying the services constitute illegal gambling, sought a preliminary injunction to shut down the contests before a final ruling.

Schneiderman Wednesday relied primarily on the assertion that daily fantasy sports -- which charge participants an entry fee to assemble lineups of actual athletes to attempt to win monetary payouts based on their performance -- is a workaround way of allowing people to gamble online. "All FanDuel and DraftKings offer is another way to bet on sports," a lawyer with the attorney general's office said at the hearing, according to Sports Business Journal. The attorney general's office largely read from a script at Wednesday's hearing, which drew criticism from legal experts on Twitter, who noted the move was unusual.

FanDuel's attorney, John Kiernan, focused on showing that players in daily fantasy affect the outcome of the contest and that those contests exist outside the results of actual on-field sports games. Boies opened by saying New York was wrongfully allowing seasonlong fantasy contests while it claimed daily contests are gambling, according to reports from the courthouse. He also further emphasized that the contests take skill, exist outside of real-life sports games and made comparisons between daily fantasy and legal activities in New York, such as horse racing. He closed by pointing out that preliminary injunctions such as the one the New York attorney general requested are not ordinary.

A rebuttal period followed each side presenting to the judge, and much of that time was spent going back and forth on the differences, or lack thereof, between seasonlong fantasy sports and daily fantasy. Mendez, during the rebuttal period, asked the attorney general to clarify the difference between the two. Schneiderman said it came down to the entry fees daily fantasy services collect for the contests, according to Sports Business Journal.

Each side was expected to be allowed about 20 minutes to present arguments to the judge, but the schedule was changed Wednesday to give each side one hour. It was then left to Mendez to decide if he would grant any of the parties a preliminary injunction pending a trial. He declined to make an immediate judgment. Any decision would be open to appeal, and DraftKings' counsel had previously indicated it would consider appealing immediately should a decision go against the company.

In part because the hearing was expected to be so brief, each side also submitted documents to the court in the days leading up to trial in support of their argument. The documents filed by the daily fantasy operators focused on attempting to show the contests are a game of skill -- a key point in distinguishing daily fantasy from gambling -- while the attorney general attacked the legal theories of operators and connected the contests to gambling.

The daily fantasy industry came under increased scrutiny last month after a scandal centered on a DraftKings employee who unintentionally leaked confidential data the same week he won $350,000 playing an NFL contest on FanDuel. Both companies, prior to the scandal, were advertising heavily and growing rapidly. The companies had been valued at more than $1 billion each.

Nevada was the first state to challenge the legality of daily fantasy but sought only to instruct the companies to obtain licenses. Massachusetts recently proposed regulations that would allow daily fantasy sports but would ban underage players and limit advertising. Fantasy sports were allowed through a loophole in the 2006 Unlawful Internet Gambling Enforcement Act, which banned online gambling. But because daily fantasy did not exist at the time, those businesses were legally permitted.