NY AG goes after Yahoo in anti-daily fantasy sports crusade

Yahoo entered this space in July after operating fantasy leagues for the past 16 years

As Eric Schneiderman, the Attorney General from New York, continues to fight with FanDuel and DraftKings, the two biggest players in the  daily fantasy sports space, he has now apparently set his sights on a new target.

After seeking an injunction to stop the two website from operating in the state altogether, saying that they were “plainly illegal” and “nothing more than a rebranding of sports betting," Schneiderman has now issued a subpoena to Yahoo as well, according to a report in the New York Times.

Yahoo is a relatively new player in this space. It announced the launch of Yahoo Sports Daily Fantasy in July, giving its users the option to compete with their friends and win cash on a daily basis, rather than having to play a whole season.

Originally it seemed like a smart move for the company. Yahoo has been hosting fantasy sports sites for 16 years. It users were spend nearly 30 billion minutes a year playing fantasy sports and the number players grew 40% in the last year, hitting more than 56 million across the U.S. and Canada.

A huge number of existing players, a growing space that it could easily split into. Seems like a no-brainer. Then the hammer fell.

Schneiderman first went after daily fantasy sports leagues in October, launching an investigation into whether the companies committed fraud after a DraftKings employee named Ethan Haskell inadvertently admitted that he had bet on FanDuel using insider information on NFL lineups before they had been publicly posted. He won $350,000 on the site.

He sent letters to both companies, asking both of them for internal data, as well as details, on how they prevent fraud. He also asked for details on any internal investigations that the companies have done into their employees.

Both companies responded by banning their employees from playing in daily fantasy leagues, along with creating advisory boards to help them sort through legal matters.

Schneiderman continued to go after both sites, however, and has now tried to ban them from operating in New York State.

The tactic worked on FanDuel, which suspended entry in paid contests for people located in New York, after it was turned down for a temporary restraining order that would have allowed users to keep playing on its site while the legal case was pending.

So far it seems as though DraftKings is continuing to operate in the state.

Both companies are very popular, and lucrative. FanDuel has over 12,000 leagues open every day, with over $10 million in real cash prizes paid out every week. The company says that it now represents 65% of the daily and weekly fantasy sports market.  In 2014 the company paid out more than $560 million to users and generated $57 million in revenue.

It also boasts partnerships with brands that include Yahoo, ESPN, CBS, NBC and the Orlando Magic.

DraftKings, meanwhile, currently has over one million users, and several hundred thousand monthly active users, and its growth can be seen in how much it has been giving out in prizes: In 2012, there was $5 million given out, a number that jumped to $45 million in 2013. That number jumped to around $300 million in 2014.

What all of this will mean for Yahoo going forward is unclear, but it is a safe bet that if the Attorney General wants FanDuel and DraftKings out, that Yahoo will soon be next.

"Yahoo does not comment on legal matters.  We are monitoring industry trends and events closely and believe that we offer a lawful product for our Daily Fantasy Sports users," a spokesperson for Yahoo told VatorNews.

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