(Adds background, details from lawsuits)
By Suzanne Barlyn
Dec 24 (Reuters) - Leading daily fantasy sports companies DraftKings and FanDuel filed lawsuits in Illinois on Thursday asking a judge to declare their games to be legal, a day after the state’s attorney general outlawed them as gambling.
The opinion Wednesday by Attorney General Lisa Madigan was the latest blow to the two companies, which are also fighting a legal battle in New York to permanently continue doing business there.
Boston-based DraftKings and New York-based FanDuel have said they would continue to operate in Illinois, despite Madigan’s opinion, pending the outcome of their lawsuits, which were filed in Cook County and Sangamon County circuit courts, respectively.
Madigan was not immediately available to comment on the lawsuits.
FanDuel brought its action with another fantasy sports company, Head2Head Sports LLC, based in Scottsdale, Arizona, which adds a layer of complexity to the Illinois case.
FanDuel games are daily in nature, while Head2Head’s are operated on a seasonal basis. The two companies asked in their lawsuit for a declaration that both types of games are legal.
In November, New York’s attorney general acknowledged that seasonal fantasy sports, which require skill to succeed over a period of months, are lawful, while daily games are based on chance and, therefore, are illegal gambling in the state.
Illinois is the third-largest market for DraftKings and FanDuel, with 6.7 percent of their users, according to Eilers Research, LLC.
The Illinois opinion comes amid nationwide scrutiny at the state and federal level as to whether daily fantasy sports games, which have surged in popularity in recent years, amount to gambling.
In October, Nevada’s gaming regulator also ordered the online sites to cease operations in the state.
The fantasy sports industry allows participants to assemble imaginary pro football, baseball, basketball and hockey teams from rosters of real players and to accumulate points based on how those players perform in actual games over the course of a season.
The daily versions allow fans to spend money on the game with a frequency that critics say is akin to sports betting. Purveyors of fantasy sports argue it is a skilled-based entertainment product, not wagering.
DraftKings and FanDuel, both privately held, have valuations of more then $1 billion; high-profile investors have poured money into both.
Their businesses in New York and Illinois could also be saved by legislatures in those states, where legalization bills have been introduced. But the level of support for these bills is unclear.
DraftKings hired a high-profile legal team in November, including David Boies and Randy Mastro, to fight cease-and-desist letters from New York Attorney General Eric Schneiderman.
Schneiderman had demanded that the companies stop taking money from players in the state. On Dec. 11, Schneiderman won injunctions against DraftKings and FanDuel, but later the same day a state appellate court temporarily stayed the order.
The companies, as a result, may continue to operate in New York until at least early January, when the appeals court is to hold another hearing. (Reporting by Suzanne Barlyn; Additional reporting by Michael Erman and Fiona Ortiz; Editing by Chizu Nomiyama, Steve Orlofsky and Leslie Adler)