ONE of Scotland's fastest-growing technology firms has suffered a major blow after a landmark ruling in the US declared it "essentially illegal".
Edinburgh-based FanDuel, which employs close to 500 people between Scotland and the US, has been ordered by the New York state attorney general to stop accepting bets.
It said the Fantasy Football-style operation, along with rival Draftkings, were essentially illegal gambling.
The letters on Tuesday from the office of New York Attorney General Eric Schneiderman said that the fantasy sites were considered gambling because customers "are clearly placing bets on events outside of their control or influence, specifically on the real-game performance of professional athletes".
In the games, fans pay to compete for daily cash prizes in simulated contests for American sports such as baseball, grid iron, basketball and ice hockey..
Nevada took a similar action in mid-October, with the state's Gaming Control Board saying the companies had to cease their operations there.
FanDuel, which was created by husband and wife Nigel and Lesley Eccles in Edinburgh, has been a massive Scots success story in the last few years.
Started in 2009, the Edinburgh company pitched to more than 90 venture capitalists during 2011 but were consistently told there was no market for them or that it was too small to build a business of scale around.
They eventually raised in the region of around $4million and have since gone on to raise more than $300million, with investors now including Time Warner and Google.
Staff numbers at the business have gone from around 120 to close to 500 over the past two years. Around half of those people work in the company’s Edinburgh headquarters and Glasgow office.
"The game has been played, legally, in New York for years and years, but after the attorney general realized he could now get himself some press coverage, he decided a game that has been around for a long, long time is suddenly now not legal."
FanDuel and DraftKings have been at the centre of a controversy since early October when a DraftKings employee won $350,000 from a $25 entry in an American football contest on their rival's site.
The two companies then banned their employees from playing, but local and federal authorities began to investigate whether the fantasy sites offered games of chance, which were essentially gambling.
In the games, fans pay to compete for daily cash prizes in simulated athletic contests.
In the letters, the attorney general's office said it demanded that the companies "cease and desist from illegally accepting wagers in New York state".
As well as preparing a UK roll-out of its brand, in recent months it has snapped up companies including Edinburgh based mobile app developer Kotikan and US-based e-sports provider Alphadraft.
Earlier this year it declared ambitious plans to employ 200 software specialists in Glasgow, while also expanding in the US where it has offices in n New York, Los Angeles and Orlando.
It is believed to have revolutionised the US fantasy sports market, which has about 41 million active players, by allowing people to play daily, in contrast to the traditional season by season model.
Last year the company gave out $560million in prize money and is projected to lift that to $1.5billion this year.
According to media reports, the US Department of Justice and the Federal Bureau of Investigation are investigating the industry.
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