New York - New York authorities on Tuesday ordered fantasy sports sites DraftKings and FanDuel to immediately stop accepting bets, saying the websites were breaking state law by engaging in illegal gambling.
The decision is a devastating blow to a multibillion-dollar industry which has faced intense scrutiny recently triggered by allegations of "insider trading" by employees with access to privileged information.
"It is clear that DraftKings and FanDuel are the leaders of a massive, multibillion-dollar scheme intended to evade the law and fleece sports fans across the country," State Attorney General Eric Schneiderman said.
"Today, we have sent a clear message: not in New York, and not on my watch." FanDuel, DraftKings and other similar companies have denied the accusation they are running gambling operations, noting that their games rely on the skill of its participants rather than pure chance.
Both companies have also denied allegations made in September of "insider trading" after it emerged an employee of DraftKings had won $350,000 on the FanDuel site.
The companies insist there was no wrongdoing, and the employee in question did not make use of privileged information.
A spokeswoman for DraftKings expressed dismay at the New York decision on Tuesday, according to the New York Times.
"We're disappointed (Schneiderman) hasn't taken the time to meet with us or ask any questions about our business model before his opinion," Sabrina Macias was quoted by the Times as saying, adding that the company had around 500,000 users in New York state.
FanDuel also challenged the New York statement that their game constituted illegal gambling.
"Fantasy sports is a game of skill and legal under New York state law. This is a politician telling hundreds of thousands of New Yorkers they are not allowed to play a game they love and share with friends, family, co-workers and players across the country," the company said.
The New York decision mirrors a similar ruling by authorities in Nevada last month, where the state attorney general said fantasy sports sites should be classified as sports betting, requiring licenses to operate.
FanDuel and DraftKings both ceased operations in Nevada as a result of the ruling, but the New York decision has far greater implications for both companies.
FanDuel's headquarters are in New York while DraftKings is based in Boston; both companies spend heavily promoting the games in New York.
Schneiderman said fantasy sites were "neither victimless nor harmless." "Our investigation has found that, unlike traditional fantasy sports, daily fantasy sports companies are engaged in illegal gambling under New York law, causing the same kinds of social and economic harms as other forms of illegal gambling, and misleading New York consumers," Schneiderman said.