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Citigroup Bans Financial Transactions of DFS Sites In New York While Some US States Observe ‘The Game of Skill’ As Legal

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February 6
11:15 PM 2016

Citigroup has announced Friday that they won't process financial transactions in New York for the daily fantasy sports (DFS) sites, DraftKings and FanDuel. The New York based investment banking company has imposed the transaction embargo followed by a legal battle with the New York Attorney General. Both are DFS sites are being trialed with allegations of illegal gambling.

New York City has become the center of the legal battle for the daily fantasy sports industry. The legal battle has started since Eric Schneiderman, Attorney General of New York sued the two DFS sites in November, reports Bloomberg.

According to the lawsuit, DFS are some forms of gambling, simply illegal in New York. However, the DFS firms argue that they offer games of skill. Continuity in accepting business from the New Yorkers while proceeding of the case has been cited as the instance of acceptability to the commoners.

Earlier, Vantiv Entertainment Solutions has walked away from FanDuel and DraftKings due to the legal uncertainty during late last month. Banning on transactions at DraftKings and FanDuel accounts by New York residents will continue till disposal of final decision by the courts, reports Deadline quoting Jennifer Bombardier, a Citigroup spokesperson.

Citigroup announced action has greater affects on the 113,000 active players that DraftKings estimates alone to have in New York. The company has been reported to earn over $100 million from entry fees in New York State last year.

Only a few states- Arizona, Washington, Iowa, Louisiana and Montana allow DFS sites to operate legally. The Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006 prevents financial institutions from transacting business with online gambling operations. But UIGEA explicitly exempts fantasy sports, sorting those as 'game of skill', reports Consumerist.

Attorney Generals (AG) for Illinois and Texas have also opined that DFS sites are illegal under their own state laws. But they haven't taken any further step to restrict the sites from continuing business.

Meanwhile, AGs from some other sites have expressed their supports for DFS. The AG of Massachusetts has proposed changes for making the sites more consumers friendly. In separate statement, Rhode Island AG Peter Kilmartin has confidently declared legality of DFS sites in his state.

DraftKings alone has reportedly earned $100 million during the last year. Only the earning scenario indicates that the so called 'game of skill' may possibly be treated as illegal gambling. Using the loophole of concerned law, FanDuel and DraftKings are continuing business while facing trial in a New York court. Surprisingly, some US states are unwilling to adopt legal actions against the DFS sites while some others declare them legal. 

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