Class Action Lawsuits over DraftKings, FanDuel Daily Fantasy Sports Begin to Mount

A growing number of class action and individual lawsuits are being filed against the internet fantasy football websites Draftkings and Fanduel.  

Many of the complaints claim that DraftKings and FanDuel engage in unfair practices, allowing employees with inside knowledge about how other contestants are playing to compete in the fantasy games for cash prizes. Other lawsuits claim that the operations are a thin veil for illegal sports gambling practices.

Both websites, now jointly owned by the same company, allow players to choose certain athletes and teams, then compete based on the performance for that week. Players pay entry fees and win cash prizes based on how their selections perform in comparison to other participants in the fantasy game.

A growing number of critics say that the websites are illegal sports gambling, using the “fantasy football” phenomenon as a cover for classic sports betting online, which is illegal.

As more complaints are filed in U.S. District Courts throughout the federal court system, at least three petitions have been filed with the U.S. Judicial Panel on Multidistrict Litigation asking that the cases be centralized before one judge for coordinated pretrial proceedings.

“FanDuel is operating an illegal online sports betting business within the State of New York,” states a motion to transfer (PDF) submitted last week by attorneys representing plaintiff Aissa Khirani. “FanDuel defines its sports betting scheme as Daily Fantasy Sports (“DFS”) in a feeble attempt to circumvent New York Penal Law which expressly prohibits profiting from ‘any contest, game [or] gaming scheme… in which the outcome depends in a material degree upon an element of chance, notwithstanding that skill of the contestants may also be a factor therein.’ FanDuel’s sports betting contests are based upon the performance of team and individuals that participate in NCAA college football, NCAA college basketball, NFL, NBA, MLB and the NHL.”

The lawsuits claiming the entire operations are illegal, noting that in traditional fantasy sports leagues, players choose specific athletes to form a “fantasy team” at the start of the season and maintain those teams for months. However, the betting websites operate on a weekly or per-game basis, with players chosen each time.

Some lawsuits have also been filed not arguing that the websites are illegal, but that they are cheating customers. Those claims are focused primarily on recent revelations that FanDuel employees are allowed to bet on Draftkings fantasy games, and vice versa, despite the fact that the companies are jointly owned and employees have access to data about how large numbers of other individuals are playing the games.

In a recent contest, an employee won $350,000 after posting player roster percentages. Although an investigation by the company indicates that the employee did not get the roster data until after he had already placed his bets, serious questions have been raised about whether employees have access to inside information and data that gives them a distinct advantage.

Plaintiff David White, filed a separate motion (PDF) with the U.S. JPML on October 15, calling for centralization of the FanDuel and DraftKings insider betting cases. It is unclear whether the two different types of cases would be consolidated as one or two separate MDLs.

Plaintiffs argue that the claims should be centralized to avoid duplicate discovery, conflicting rulings and to serve the convenience of the courts, witnesses and all parties. The Khirani and White motions have both proposed that the lawsuits be consolidated in the Southern District of New York.