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Schneiderman's Office Halts DraftKings, FanDuel Bets In New York State

ALBANY, N.Y. (CBSNewYork/AP) -- New York state Attorney General Eric Schneiderman has ordered two major fantasy football companies to stop accepting bets in the state.

Schneiderman said DraftKings and FanDuel's games constitute illegal gambling.

"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 in a statement. "Daily fantasy sports is neither victimless nor harmless, and it is clear that DraftKings and FanDuel are the leaders of a massive, multi-billion-dollar scheme intended to evade the law and fleece sports fans across the country. Today we have sent a clear message: not in New York, and not on my watch."

In a pair of letters sent to the companies, Attorney General Eric Schneiderman said that after a one-month investigation, his office had concluded that the daily contests are essentially games of chance, not skill.

He drew a sharp distinction between the operations of daily fantasy sports sites and traditional fantasy leagues, which he said were legal partly because they relied on months of smart play over the course of several months. DraftKings and FanDuel contests, he wrote, are about ``instant gratification'' and involve no long-term strategy.

Schneiderman also said advertisements by the two companies, including one from Draft Kings promoting the site as ``the simplest way of winning life-changing piles of cash,'' misled players about their chances of winning. The top 1 percent of players, he wrote, take home most of the prizes.

"Daily fantasy sports is neither victimless nor harmless, and 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,'' Schneiderman said in a statement issued after the letters were sent.

Both companies insisted that their games are legal and based on skill and said they were reviewing their legal options. Schneiderman's letter gave the companies five days to respond and show why he shouldn't initiate legal action.

``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,'' FanDuel said in a statement. ``The game has been played -- legally -- in New York for years and years, but after the attorney general realized he could now get himself some press coverage, he decided a game that has been around for a long, long time is suddenly now not legal.''

DraftKings said it was disappointed in Schneiderman's action, "particularly since he did not take any time to understand our business or why daily fantasy sports are clearly a game of skill.'' It said the company would "vigorously pursue all legal options available to ensure our over half a million customers in New York state can continue to play the fantasy sports games they love.''

DraftKings also earlier issued a letter warning that Schneiderman was considering banning bets in New York state. The company urged its customers to "send the Attorney General a note, telling him you oppose any measure that would restrict your ability to play daily fantasy sports in New York."

"Fantasy sports build community -- and now it's time for our community to stand together to protect the game we love," the DraftKings letter said.

FanDuel's offices are in New York. DraftKings is headquartered in Boston.

Schneiderman's actions were aimed only at the two companies but could serve as a warning for other companies with similar operations.

Schneiderman's office has been for some time into whether employees at DraftKings and FanDuel have an unfair advantage at winning prizes using their companies' data – in what would constitute insider trading.

WEB EXTRA: NYAG to FanDuel Letter | NYAG to DraftKings Letter

Last month, FanDuel said it will permanently ban all employees from playing any daily fantasy sports for money and began an internal probe following reports a DraftKings employee may have had access to unfairly valuable data before winning $350,000 in a FanDuel contest.

FanDuel said it hired former U.S. Attorney General Michael Mukasey to evaluate its internal controls.

It also created an advisory board led by Michael Garcia, a lawyer who led the investigation into the 2018 and 2022 World Cup bid process then resigned from the FIFA ethics committee in protest over the handling of his findings.

(TM and © Copyright 2015 CBS Radio Inc. and its relevant subsidiaries. CBS RADIO and EYE Logo TM and Copyright 2015 CBS Broadcasting Inc. Used under license. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)

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