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New York to daily fantasy sports: Stop staking bets here

<p>In what could be another blow to the legality of daily fantasy sports, New York Attorney General Eric Schneiderman has issued a cease-and-desist order to FanDuel and DraftKings. (Video via <a href="https://www.youtube.com/watch?v=NwJnBV52rUE" target="_blank">DraftKings</a>) </p><p>Schneiderman <a href="http://www.nytimes.com/2015/11/11/sports/football/draftkings-fanduel-new-york-attorney-general-tells-fantasy-sites-to-stop-taking-bets-in-new-york.html?smid=fb-nytimes&smtyp=cur" target="_blank">made a statement</a> saying, "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."</p><p>Both companies have insisted their business model is perfectly legal, but it's really more of a gray area. It basically comes down to whether or not they can argue if it takes skill to draft the best players each week, or if winning just requires luck. If chance is a material factor in the outcome, that would legally make it gambling.</p><p>Both companies have a lot to lose. New York reportedly has the most daily fantasy players of any state, not to mention FanDuel just <a href="http://espn.go.com/chalk/story/_/id/14100780/newyork-attorney-general-declares-daily-fantasy-sports-gambling" target="_blank">opened its new headquarters</a> in New York City. But this is just another in a long line of headaches for daily fantasy.</p><p>FanDuel and DraftKings are already <a href="http://www.legalsportsreport.com/daily-fantasy-sports-blocked-allowed-states/" target="_blank">prohibited in six states</a> and experts say if New York's challenge goes through, it could spread to other parts of the country. And the scrutiny on these sites could go all the way up to the federal level.</p><p>Last month The Wall Street Journal reported that DraftKings is being <a href="http://www.wsj.com/articles/fbi-justice-department-investigating-daily-fantasy-sports-business-model-1444865627" target="_blank">investigated by the FBI</a> to determine if it really falls outside the gambling exemption. And several multi-billion dollar companies will be paying close attention to see what they determine.</p><p>FanDuel and DraftKings have attracted several huge investors like Fox, Time Warner, Comcast Ventures and Google Capital, which explains why they've been able to spend hundreds of millions of dollars on adverstising. (Video via <a href="https://www.youtube.com/watch?v=-lVS87mhZQo" target="_blank">FanDuel</a>)</p><p>And even though the MLB, NBA and NHL all have anti-gambling rules, that didn't stop them from snatching up equity in the two largest daily fantasy sites.</p><p>The NFL avoided this PR headache by not investing in either site, but two of its most controversial owners, Jerry Jones of the Dallas Cowboys and Robert Kraft of the New England Patriots, both own part of DraftKings.</p><p>But even through the legal challenges and scrutiny, DraftKings and FanDuel are still churning out money, <a href="http://espn.go.com/chalk/story/_/id/13869135/daily-fantasy-sites-draftkings-fanduel-take-highest-number-entries-nfl-season" target="_blank">making millions</a> of dollars each NFL Sunday. At least, for now. (Video via <a href="https://www.youtube.com/watch?v=d-m6vQNOnf8" target="_blank">FanDuel</a>) </p><p><i>This video includes images from Getty Images. </i></p>
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NEW YORK (AP) — New York's attorney general on Tuesday ordered the daily fantasy sports companies DraftKings and FanDuel to stop accepting bets in the state, saying their operations amount to illegal gambling.

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 promoted like a lottery 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 remained legal.

Schneiderman said the daily contests are "neither harmless nor victimless" and carry the same social and economic costs of other forms of gambling. In a separate statement, he accused the companies of being "leaders of a massive, multibillion-dollar scheme intended to evade the law and fleece sports fans across the country."

New York-based FanDuel insisted in a statement that its games are legal.

"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," it said. "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."

Boston-based DraftKings said in a statement that 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."

Daily fantasy sports have become increasingly popular, with DraftKings and FanDuel blanketing the Internet and TV ahead of and during the 2015 NFL season with ads promising casual fans the opportunity to win big money playing in tournaments against other sports buffs who meticulously track player statistics.

The sites have come under increased scrutiny since it was revealed last month that a midlevel DraftKings employee playing fantasy football beat more than 200,000 other players, winning $350,000 on rival FanDuel. The case raised questions about insider trading after game data not publicly accessible was inadvertently posted online.

The companies have said their employees didn't appear to violate industry rules but launched internal probes and barred their workers from playing on rival websites.

News of that episode prompted Schneiderman to ask the companies to turn over information.

Nevada regulators ordered the sites to shut down on Oct. 15, ruling that they couldn't operate in the state without a gambling license.