• by Wendy Davis  @wendyndavis, January 11, 2016

A New York appellate court said on Monday that DraftKings and FanDuel can continue to operate in the state pending a decision about whether the daily fantasy sports sites violates a prohibition on gambling.

The ruling is the latest twist in a legal battle that began late last year, when New York Attorney General Eric Schneiderman sought a court order against DraftKings and FanDuel. Both companies opposed that order, but FanDuel also suspended operations in the state.

Schneiderman alleged that the companies violate state laws against sports betting and unfair advertising. He contended that both companies -- which have spent around $100 million on ads this year alone -- dupe consumers with ads that offer "promises of easy riches for a lucky few sports fans."

Manhattan Supreme Court Judge Manuel Mendez ruled in December that New York's law against gambling is broad enough to cover daily fantasy sports. That law prohibits betting on games of "chance," including sporting events (except for horse racing), but allows gambling on games of skill. Mendez rejected the companies' argument that daily fantasy sports are games of skill, not chance.

DraftKings and FanDuel obtained an emergency stay of that order the same day it was issued. Last week, the companies asked the Appellate Division, First Department, to extend that stay until the appeal was decided.

DraftKings said in its papers that Mendez's injunction would deprive "375,000 New York customers of the contests they love and have been enjoying for years."

The company added that Mendez's order would cost it millions of dollars, while harming relationships with a host of sports organizations, including Fox Sports, Major League Baseball, the National Hockey League, the New York Yankees, the New York Mets, the New York Knicks, the New York Giants and the New York Rangers.

The daily fantasy sports site also argued that contests "are dominated by skill, not chance."

"Selecting a fantasy team requires contestants to exercise skill, including the assessment of a wide array of factors, such as the historical performance of athletes, the on-field strategic tendencies of real-life coaches and athletes, team and athlete matchups, weather patterns, and injury risks," the company said in its legal papers.

For his part, Schneiderman argued to the Appellate Division that daily fantasy sports are "merely a new manifestation of a type of activity that has long been considered gambling."

He added that the "undisputed evidence proves that chance is an unavoidable and material element" of the contests.

On Monday, DraftKings lawyer David Boies praised the Appellate Division's decision to grant the stay. "Daily Fantasy Sports contests are as legal now as they have been for the past seven years that New Yorkers have been playing them," he said in a statement.

Boies added that DraftKings will argue on appeal that daily fantasy sports contests "require just as much skill as season-long contests."

The Appellate Division isn't expected to decide the case until at least May.