NEW YORK — The nation’s two largest daily fantasy sports websites have agreed to stop taking paid bets in New York, potentially through most of the professional baseball season, as lawmakers consider legalizing the popular online contests, the state attorney general announced Monday.
The deal struck between Attorney General Eric Schneiderman and the companies, DraftKings and FanDuel, essentially takes the dispute out of the courts and into the capitol, at least temporarily, where key lawmakers indicate legislation regulating the industry could pass by mid-May.
Schneiderman’s claims against the companies for false advertising and consumer fraud will not be affected by the agreement, according to the stipulation.
“As I’ve said from the start, my job is to enforce the law, and starting today, DraftKings and FanDuel will abide by it,” Schneiderman said in a statement.
In statements, spokespeople for both companies said they would seek to clarify state law to allow their New York customers to play without ambiguity.
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Hundreds of thousands of New Yorkers play fantasy sports, in which users pay entry fees to manage rosters of teams like a general manager and then earn points depending on how well those players do. The companies have depicted their contests as games of skill, not chance.
But Schneiderman disagreed and in November sent the companies cease-and-desist letters, arguing the businesses were essentially illegal gambling operations based on chance. The games, he argued, are dependent on many factors — such as player injuries or bad weather — that could affect the outcome despite a player’s skill level.
Under the agreement, if Albany lawmakers fail to pass legislation, a state appeals court will take up the case during its September term. In the meantime, the companies cannot take bets from users with New York IP addresses and must withdraw their New York clients’ balances within seven days of being asked to do so.
J. Gary Pretlow, a Democratic state assemblyman who chairs a committee on racing and wagering, said lawmakers will draft legislation to legalize daily fantasy sports, likely after the state budget passes but before the session ends in June.
“The top concern is ensuring the underage, or minors, aren’t participating,” he said, adding the legislation will also likely involve licensing and taxes.
The sites’ business models, which have come under scrutiny in other states such as Illinois and Nevada, drew the eye of regulators after they flooded TV, radio and the Internet with ads ahead of the 2015 NFL football season, pitching their games as easy ways for average sports fans to win big money.
But critics and consumer advocates noted that only a top cadre of players using algorithms and other tools win most contests, and regulators warned that gamblers and young players in particular were at risk of losing more than they could possibly win.