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Either way, the news Friday that FanDuel will cease operations in the Lone Star state by May was another blow to the daily fantasy sports industry, which has been under fire for the past several months and whose future viability is in question.
In January, Texas Attorney General Ken Paxton opined that daily fantasy sports sites like FanDuel and DraftKings were illegal because they were gambling websites and not games of skills.
Though his opinion is non-binding, FanDuel and Paxton reached an agreement that it would stop accepting paid entries by May 2. DraftKings, however, will continue the fight to keep DFS alive in Texas.
“We are committed to ensuring that our fans can continue to enjoy the contests they love,” DraftKings attorney Randy Mastro said in a statement, via the Dallas Morning News.
As such, the Morning News writes that DraftKings has filed a petition for a declaratory judgment in Dallas County District Court so a judge can decide if DFS games are legal in Texas.
FanDuel will still offer free games to Texas residents, but in its agreement with Paxton, he’s agreed not to press charges against the company if it stops taking paid entries.
In January, thousands of Texans sent form letters to Paxton, at the behest of a fantasy sports alliance called the Fantasy Sports for All group, asking the attorney general to leave DFS alone.
Said the form letter: “I believe this is a matter of personal choice, and that the government has no business telling me I can’t play fantasy sports.”
The bad news for DraftKings and FanDuel began in October when a DraftKings content manager won $350,000 while playing on FanDuel the same week he accidentally leaked inside information that could have helped his chances tremendously to win big (DraftKings denied that he had utilized that information).
Though employees were then banned from playing on other daily fantasy sites, the websites began attracting attention from state attorney generals and legislatures along with the FBI. The state of Nevada banned FanDuel and DraftKings from operating last October, and New York soon followed suit, though an appeals court has overturned that order.
Arizona, Iowa, Louisiana, and Montana also don’t allow DFS to operate, and states like Washington are still trying to determine how to move forward with this issue.
Fantasy Sports for All has said 2 million Texans play daily fantasy sports, which is one reason why this news was impactful.
“Texas is a top-five market for daily fantasy sports operators, and the decision to leave the state without a fight was probably not one made lightly by FanDuel,” Dustin Gouker, who covers DFS for Legal Sports Report, told The Comeback. “FanDuel gives up marketshare to DraftKings, who will presumably stay in the Texas market while it fights the battle in court. It does have the feel of FanDuel playing the ‘long game’ and living to fight another day.”
Said Paxton in a statement: “I commend FanDuel for responsibly and pro-actively working with us to reach this settlement. This will spare both the company and the taxpayers of Texas the expense of an extensive lawsuit that I believe would only affirm what my office has already determined.”
Josh Katzowitz is a staff writer at the Daily Dot specializing in YouTube and boxing. His work has appeared in the New York Times, Wall Street Journal, Washington Post, and Los Angeles Times. A longtime sports writer, he's covered the NFL for CBSSports.com and boxing for Forbes. His work has been noted twice in the Best American Sports Writing book series.