Payment processor Vantiv Entertainment Solutions has told daily fantasy companies it works with that it will stop doing business in the space as of Saturday, The New York Times reported Friday.
The newspaper reported that the company sent letters to the DFS operators referencing the opinion of the attorneys general in several states who contend that daily fantasy games under their state laws are illegal.
Although daily fantasy companies have been fighting in court in those states, which include New York, Texas and Illinois, the letter written by a Vantiv executive -- and obtained by the Times -- noted that "to date those arguments have been unsuccessful and/or rejected." The executive, Jonathan Ellman, who is chief transaction and marketing counsel for the company, said in the letter that Vantiv would consider re-entering the marketplace when legal hurdles have been cleared.
It's unknown what percentage of daily fantasy business Vantiv affects, but it is considered a major player.
Vantiv did not return messages left for comment.
The Times said that Vantiv's decision included the biggest daily fantasy companies, DraftKings and FanDuel, but that was called into question when DraftKings outside counsel David Boies said in a statement Friday afternoon that the company "has not told DraftKings that it plans to cease fulfilling its contractual obligations."
Boies also stated that Vantiv is under court order, per the temporary restraining order in Massachusetts, "to continue to fulfill its contractual obligation to DraftKings."
A FanDuel representative said the company would have no comment.
"Its departure will be a blow to DFS operators, large and small," said Indiana University professor Sarah Jane Hughes, who is an expert on payment processing.
Hughes said payment processors face penalties under the Unlawful Internet Gambling Enforcement Act of 2006 if they participate with people or companies that states have deemed as participating in illegal gambling. But because the matter has been tied up in the courts, it's unclear why Vantiv might have made a sudden change or whether they're even legally allowed to.
Vantiv's investors evidently appreciated the news that the company might be leaving the daily fantasy business. Over the past month, the stock was down 6.7 percent. On Friday alone, shares rose 6 percent.
PayPal Holdings Inc. also processes payments for daily sports companies.
"We are aware of Vantiv's recent decision to discontinue processing payments for Daily Fantasy Sports services," PayPal spokeswoman Martha Cass said in a statement. "We continue to review and consider ongoing developments in relation to daily fantsy sports."
Information from The Associated Press was used in this report.