The two biggest daily fantasy sports companies have asked a New York judge to stop the state's attorney general from ordering them to halt their business operations.
Court papers filed in state Supreme Court in Manhattan on Friday show FanDuel and Boston-based DraftKings are both seeking a judge's ruling on the legality of their business.
It comes after New York Attorney General Eric Schneiderman ordered the fantasy sites to stop taking bets in New York, calling the companies illegal gambling sites.
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But in court papers, both companies argue the opposite. They say daily fantasy sports are actually more skill-based than season-long fantasy sports, which are legal in New York. They also charge Schneiderman threatened their business partners and payment processors.
DraftKings' suit calls the cease-and-desist order "unconstitutional" and alleges Schneiderman is "misreading" New York's gambling laws, and attempting to "bully" DraftKings and its vendors into immediately shutting down its New York operations before it has a chance to defend itself.
The company says New York is home to more than 7 percent of its customers.
"The Attorney General's actions constitute a shocking overreach," the suit reads. "He has unleashed an irresponsible, irrational, and illegal campaign to destroy a legitimate industry, intending to deprive hundreds of thousands of New Yorkers of the use and enjoyment of these services."
Schneiderman's spokesman says the companies are operating illegally.
"The Attorney General's job is to enforce New York State law, and the law here is clear. Online sports gambling sites are illegal in New York. DraftKings and FanDuel are operating illegal sports betting websites under New York law, causing the same kinds of social and economic harms as other forms of illegal gambling. As a result, our office issued a cease and desist letter to stop them from violating state law by accepting bets from people in New York. Because both companies have refused to follow the law in our state, we will take action to enforce state law," Schneiderman's office said in a statement.
Both DraftKings and FanDuel claim their websites do not constitute gambling, since their games require skill.
Fantasy sports has been a popular U.S. pastime for years, but daily contests, where winners and losers are decided in one night, rather than over the course of a season, have exploded in popularity recently. DraftKings and FanDuel have advertised heavily on the Internet and TV ahead of and during the 2015 NFL season.
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.
NECN and NBC's parent company, Comcast Corp., and NBC Sports are among the investors in FanDuel.