Why FanDuel and DraftKings say demand to pay back customers’ losses will not happen

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NEW YORK — More than 600,000 New Yorkers regularly play fantasy sports online, according to statistics listed in a new legal filing from New York Attorney General Eric Schneiderman. However, his office also points out, about 90 percent of players, roughly the population of Staten Island, regularly lose money on the biggest daily fantasy sites. That new filing by the attorney general's office, called a revised complaint, could end up seeing that lost money being returned to customers, even though one of the two main fantasy sites said on Friday that it is determined that it won't happen.

Several fantasy sports players, though, told PIX11 News that they would welcome a court-mandated refund.

"I'd get back a little bit of money," Chris Jones said, who described himself as an occasional fantasy sports player. "But friends of mine," he added, could see payback "way up in the tens of thousands of dollars."

"Return all money that you lost? That's crazy," fantasy sports player Steve Sarkis said. When asked if he felt it would be crazy in a way that's beneficial to him, he answered, "Yes. It is."

Both men play two of the biggest daily fantasy sites: Draft Kings and FanDuel. Attorney General Schneiderman had gotten those sites temporarily shut down last month, arguing successfully before a judge that they're illegal gambling outlets.

An appellate court overturned the judge's ruling, which got the two sites back in business pending further appellate hearings. Still, that's not stopping the attorney general.

On New Year's Eve, just before the Times Square ball dropped, Schneiderman filed the revised complaint that would require FanDuel and DraftKings to pay back customers losses, and to also pay a $5,000 fine to the state for each loss.  That demand could total in the hundreds of millions of dollars if it were to be approved by the panel of appellate judges.

That could happen, according to legal analyst Amy Dardashtian. She told PIX11 News in an interview that she believes that Schneiderman is attempting to use the fullest extent of his powers under the law to get FanDuel and DraftKings to strike a plea deal to stop operating in New York permanently.

"The attorney general is accusing DraftKings and FanDuel of illegal activity" such as money laundering, Dardashtian said. "That could result in prison time."

Dardashtian also mentioned what will remain the crux of the case until it's resolved legally. An appellate judicial panel will have to determine whether fantasy sports wagers are games of chance or games of skill. The state is counting on the fantasy sites to conclude that the judges are likely to rule that fantasy sports play is based on chance, and therefore illegal gambling.

Some fantasy sports play customers who spoke with PIX11 agreed that that's a likely outcome. "If they're going to go say it's gambling, why not kick [the money] back" to players, asked fantasy sports customer Todd Gaynor. "It's been illegal the whole time," he added.

If judges rule against FanDuel and DraftKings, it could have big consequences for the most active sites in a $2.6 billion industry that's growing steadily.  Dardashtian said that Schneiderman is counting on that.

"This is a tactic," she told PIX11 News. She said that the attorney general's strategy is to spur FanDuel and DraftKings to strike a deal, knowing that its operators could potentially face serious jail time if they're found by judges to be engaged in illegal gambling.

"What the attorney general is likely to say," said Dardashtian, "is 'Pay back the money, and we just won't put you in jail at all.'"

Friday afternoon, David Boies, lead attorney for DraftKings, issued a statement making it very clear how he and his legal team believe the  appellate panel will rule.  The statement also blatantly insulted Attorney General Schneiderman's legal filing that demands refunds and fines.

"The attorney general's revised complaint reveals that the attorney general's office still does not understand fantasy sports," the statement begins. "Like the NYAG (New York Attorney General) original complaint, it is based on the fundamental misunderstanding of fantasy sports competitions."

"Everyone who plays fantasy sports knows they are games of skill," the statement continues, in part. "It is the opportunity to match your knowledge and skill against the knowledge and skill of your friends and other fantasy enthusiasts that makes DFS (daily fantasy sports) contests so exciting and challenging."

That will ultimately be up to the judges to decide.  The next hearing in the case is scheduled for Monday, Jan. 4.