DraftKings files lawsuit against State of New York and asks NBA teams to defer payments for now

It hasn’t been the best of weeks for DraftKings. It was declared illegal in New York by Attorney General Eric Schneiderman and was ordered to cease-and-desist from taking money from customers. In addition, Draft Kings is facing legal challenges in other states like California, but perhaps not in its home base of Massachusetts where Governor Charlie Baker has said daily fantasy games are of skill than rather than chance.

However both DraftKings and FanDuel have filed lawsuits against Schneiderman in New York Supreme Court seeking a reversal of the order that bans them from doing business in the Empire State. DraftKings contends the New York order is illegal:

“We are asking the New York Supreme Court to rule that the attorney general’s cease-and-desist letter is unconstitutional, an abuse of discretion, and simply wrong,” the company said in a statement.

The DraftKings lawsuit can be found here.

Still, DraftKings is beginning to pull back on its huge ad blitz that started before the college and pro football seasons and continues through today. And according to Bloomberg, the daily fantasy site is asking its partners including NBA teams to defer payments for the time being:

DraftKings has asked some of its National Basketball Association partners to defer about 10 percent of its committed payments, according to people familiar with the deal. It has also asked that its signs and banners in arenas show up on television less often, according to one of the people.

This suggests that the company is trying to lower its profile at a time when it is facing an increasingly hostile political environment. DraftKings and FanDuel have also been spending less on television advertisements, although the companies say that it was always their plan to reduce marketing spending at this point in the NFL season.

“We have good relations and are in good standing with all of our partner teams. We are always in dialogue with them, including now,” DraftKings said in a statement.

While lowering its profile, this doesn’t mean that DraftKings is going under, but it may mean its saving cash for its legal fight in New York. The company has trying to drum up support in New York and in California where it may also face a fight:

Where this goes is anyone’s guess. At this point, states are looking into daily fantasy with a fine-toothed comb and are determining their legality. The daily fantasy industry could look very different in a mere few months depending on how states and the courts rule.

[Bloomberg]