FanDuel and DraftKings prepare legislative push in New York

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Fantasy sports fans demonstrate outside the Financial District offices of Attorney General Eric Schneiderman. (AP Photo/Richard Drew)
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ALBANY — Daily fantasy sports site are preparing for a legislative push, retaining some of New York’s most prominent lobbyists in the wake of Attorney General Eric Schneiderman’s determination that the companies were facilitating illegal gambling.

A day after Schneiderman, a Democrat, sent DraftKings and FanDuel cease-and-desist letters last week, the companies jointly signed Steve Harris of Cordo & Company to a $9,500-a-month contract. It's the second firm that the companies, working with the Fantasy Sports Trade Association, have retained. The three signed a $7,500-a-month retainer with the Parkside Group in August.

The new muscle in New York is on top of the advisers that have already been helping the companies on a national scale. FanDuel hired Marc La Vorgna — who served as a spokesman for former New York City mayor Michael Bloomberg — in October to help with messaging. The company has also retained Bradley Tusk, who ran Bloomberg's 2009 re-election campaign, to do grassroots campaign work, which included a Friday morning rally outside Schneiderman's offices in Lower Manhattan.

Spokespeople for both FanDuel and DraftKings declined to comment on their legislative strategy, and are currently focusing on a legal response to the attorney general's effort. On Friday, the companies filed petitions to stave off Schneiderman's decision.

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But both sides seem to be bracing for a policy push.

Speaking Thursday at a POLITICO event, Schneiderman said the State Constitution is "pretty clear" on the issue, and essentially challenged FanDuel and DraftKings to change the law if they do not like it.

"I'm happy to give them the phone numbers of the governor and the leaders of the Legislature, but that's where they should be headed," he said.

A spokesman for the State Gaming Commission, which oversees the state lottery as well as horse racing and New York's nascent casinos, said its commissioners asked for an explanation of “how does [DFS] fit into the Gaming Commission's regulatory role, and a full explanation of why it doesn't as we sit here today.”

On Wednesday, FanDuel CEO Nigel Eccles told reporters on a conference call that it would lobby as necessary — in New York and elsewhere.

“What we've seen in other legislatures is more of an engagement with the company. … That seems to be more of the direction of travel. That's certainly what we think is the appropriate approach,” he said. “We're trying to address it appropriately. We want to make sure our players' voice is heard. There may be 50 million of them, but they maybe don't know the right way to get to their legislator, so we want to be out there helping them.”

It's not clear whether the DFS companies would need to amend the State Constitution — which prohibits all gambling except for a small list of exceptions — in a process that could take several years, or simply change state laws by passing a bill through the Legislature. Company spokespeople would not detail that strategy (because they insist their service is currently legal) and Schneiderman on Thursday declined to weigh in on what would be needed, suggesting the company has a "phalanx of lawyers" who could answer that question.

The companies appear to be starting with the relevant committee chairs.

The only detailed information in Parkside’s disclosure report covering activity in September and October is that they lobbied Assembly staffer Joseph Garba and the offices of the chairmen who oversee gaming: Assemblyman Gary Pretlow and State Sen. John Bonacic.

Pretlow did not return a call seeking comment.

On Friday, Bonacic said in a statement that legislators may look to regulate the company, but that he does not fundamentally consider them gambling operations.

“With the explosive growth of Daily Fantasy Sports in the United States, questions have arisen about their operations,” Bonacic stated. “I personally believe that it is a game of skill, and not a game of chance. Daily Fantasy has operated legally for years in NY and is very popular, however it can be highly addictive. As such, consumer protections may be in order. I expect to have discussions with my colleagues on Daily Fantasy Sports when the legislative session convenes in January.”

Cuomo, for his part, said on Thursday that Schneiderman's inquiry was on a “legitimate topic.”

The companies have considerable resources to fight back against what they perceive to be an existential threat from Schneiderman, whose action could cost them thousands of customers in New York and raise the bar for regulators to scrutinize the industry in other states.

The FSTA has already started a petition to Schneiderman and Gov. Andrew Cuomo and helped organize the Friday rally. Between them, the two companies reportedly spent a combined $107 million on television commercials in September alone, on top of an unknown amount of advertising on the internet and radio.

The companies also have connections to some of Albany’s top-spending interests, though none have reported directly lobbying on daily fantasy regulation. FanDuel has received capital from Time Warner and Comcast, while Fox owns 11 percent of DraftKings and Disney Co.’s ESPN has a “major marketing deal” with the company.

The New York Knicks’ Charles Dolan is perennially one of the state’s largest campaign contributors, and Buffalo Bills co-owners Kim and Terry Pegula, and Miami Dolphins owner Stephen Ross have donated large sums to Cuomo and the state Democratic Party.

These owners aren’t among those publicly identified as investors in these sites, but several leagues and dozens of individual teams have partnerships with daily fantasy sports companies. The Dolphins, for example, have a partnership with DraftKings and post a weekly “Finsiders DraftKings Selections” column in the “news” section of their website, but the team said in October (prior to Schneiderman's letter) that they would "consider all of our options, including termination, if their business model is deemed to be unlawful."