Fantasy sports sites FanDuel Inc. and DraftKings Inc., already facing mounting legal and regulatory scrutiny, ran into more trouble when Citigroup Inc. said it was blocking transactions by New York state residents.
The move by the world's largest credit-card lender added to the pressure in New York, the heart of the fantasy-sports industry's legal woes since Attorney General Eric Schneiderman sued the companies in November. Schneiderman contends that daily fantasy sports are a form of gambling, which is illegal in New York. The firms say they offer games of skill, and are accepting New Yorkers' business as while the case works through the courts.
Citigroup's ban will stand until the courts make a final decision, spokeswoman Jennifer Bombardier said Friday in an e-mailed statement.
Representatives for FanDuel said that while they were unaware of Citigroup's attempts to prohibit transactions, "we are grateful that there are various payment options and companies that allow their customers to make their own decision about what fantasy sports they can play." Boston-based DraftKings didn't respond to requests for comment.
While it's unclear whether the payments industry is legally vulnerable in this case, the perceived risk has grown with each state attorney general who has expressed skepticism about the legality of daily fantasy sports. "These opinions raised the level of legal risk for daily fantasy sports operators to an unacceptably high degree," said Daniel Wallach, a sports and gaming attorney with the law firm Becker & Poliakoff.
In daily fantasy sports games, players assemble rosters of professional players and win or lose based on the real-life performance of those players.
Six states so far have banned daily fantasy sports games. Others have chosen more moderate regulation. Casino mecca Nevada has classified the activity as gambling, making the games subject to the rules and taxation there. The attorney general in Massachusetts has proposed regulations that label the sites gambling but legal for players over 21 for contests excluding college sports. Rhode Island's attorney general determined this month that the sites are legal.
Other financial services companies are blocking transactions as well. Charles Drucker, chief executive officer of payments-processor Vantiv Inc., said on Feb. 3 that his firm had stopped processing transactions from daily fantasy sites. The company, which handles payments for casinos and state lotteries, cited the "uncertain regulatory and judicial environment around these operations."
DraftKings and New York-based FanDuel have said that their customers wouldn't be affected by Vantiv's decision because the sites could just send business to another processor.
Credit and debit cards issued by some other banks still work. JPMorgan Chase & Co. cardholders may use their cards on the sites, a spokesman said. American Express Co. cards still work and the company is "monitoring the situation closely," a spokesman said.
DraftKings and FanDuel are each valued more than $1 billion and have investors across the sports, media and venture-capital industries.