The legal battle encompassing DraftKings has only just begun. The online fantasy business has defended its decision to continue operating in New York while state prosecutors try and bar the daily fantasy sports site and its rival FanDuel from operating in the state.
This despite the DraftKings and FanDuel's employee playing policies that were entered as evidence and made public in a recent report by Deadspin. The report reveals policies within the company that does not forbid employees from playing in games, despite having access to inside information that improves the odds of winning.
Furthermore, the policies express extremely generalized terms regarding the sharing of information and making a conscious effort to not win to frequently while playing. It was a DraftKings employee who had access to inside information winning $350,000 thousand dollars in FanDuel contest that caught the eye of both the public and the legal community.
Advertised as a skill game and not gambling, DraftKIngs and FanDuel have been able to side step many state anti-gambling laws, but those loopholes are now under scrutiny. Shortly after the news of suspicious winnings of a DraftKings employee broke, the state of Nevada banned both sites from operating in their state, unless the filed formally as a gambling entity.
Now both companies are faceting a class-action lawsuit, along with a number of their partners which include the NBA, NHL, and MLB. There are even partnerships linked with Dallas Cowboys owner Jerry Jones, New England Patriots owner Robert Kraft and President and CEO of Cablevision Systems Corporation James Dolan.
The suit, which was filed in Florida last week, states that betting, even on skills-based contests (the designation that DraftKings and FanDuel had used to slide by anti-gambling laws) is illegal. This is what makes the filing so important.
Should the suit progress, officials from the named parties may be called to testify and reveal financial information about how much FanDuel and DraftKings paid for advertisements. The suit also lists Visa, MasterCard, American Express, J.P. Morgan, Capital One Bank, Google Capital, Piton Capital, Scottish Investment Bank, PayPal, Paysafe, Vantiv, Turner Sports, Time Warner, NBC Sports Comcast Ventures, 21st Century Fox, and Fox Sports Interactive Media is the first time that leagues and media companies used to promote have been involved in the suit.
The suit holds that DraftKings and FanDuel have engage in illegal gambling and deceptive practices under Florida and federal laws and that the banks, leagues and other companies negligently failed to realize they were investing and partnering with illegal gambling operations.
So what could come of all this? Well from a class-action standpoint, if it gains class-action certified, there will be thousands of aggrieved daily fantasy sport customers file. The case also may not fully make daily fantasy sports illegal, but would inflict damage on the industry's infrastructure that could make it all but impossible to perform.