When Yahoo announced at a San Francisco sports bar this summer that it was introducing a new high-stakes fantasy sports website allowing users to wager up to $600 each day, the company asserted that it was a game of skill, not gambling.
New York Attorney General Eric Schneiderman might not be buying that argument. The prosecutor who this week accused popular fantasy sports startups DraftKings and FanDuel of illegal sports betting is now adding the Sunnyvale tech giant to his probe, according to an unnamed source who spoke to The New York Times.
Yahoo said in an emailed statement Wednesday that it “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.”
Users can pay up to $600 in “contest entry fees” each day, and Yahoo gets 10 percent of the amount wagered, the company has said.
“We certainly encourage people to play responsibly,” Ken Fuchs, who led Yahoo Sports as the company’s former vice president of publisher products, said when he introduced the new product at a news conference in July. Fuchs has since left the company, joining an exodus of executives in recent months. He is now CEO of sports statistics firm Stats, which provides content to media and professional and fantasy sports leagues.
Yahoo’s daily fantasy sports offering — a more intense version of the seasonal fantasy sports leagues popular with many Americans — launched on browsers and mobile devices on July 8 in all but a handful of U.S. states. New York was one of them, but it might not be for long.
Schneiderman, who on Tuesday filed an enforcement action seeking to shut down DraftKings and FanDuel in his state, objected to their argument that Daily Fantasy Sports is not gambling because it involves skill:
“This argument fails for two clear reasons,” his office said on its website. “First, this view overlooks the explicit prohibition against wagering on future contingent events, a statutory test that requires no judgment of the relative importance of skill and chance — they are irrelevant to the question. Second, the key factor establishing a game of skill is not the presence of skill, but the absence of a material element of chance. Here, chance plays just as much of a role (if not more) than it does in games like poker and blackjack. A few good players in a poker tournament may rise to the top based on their skill; but the game is still gambling.”
Daily fantasy games will generate about $2.6 billion this year in entry fees, an industry euphemism for wagers, growing 41 percent annually to an estimated $14.4 billion by 2020, according to Eilers Research in Anaheim.
The number of people playing fantasy sports this year will total 56.8 million, according to the Fantasy Sports Trade Association.
Contact Matt O’Brien at 408-920-5011. Follow him at Twitter.com/Mattoyeah. The Los Angeles Times contributed to this report.
