Class Action Lawsuit Claims DraftKings Is Dodging State Gambling Laws

Lawsuit alleges more than two-thirds of sports wagers made on DraftKings Predictions occurred in states where sports betting was illegal.

A California man has filed a class action lawsuit alleging DraftKings’ recent expansion into prediction markets is an attempt to circumvent state laws that prohibit sports betting and online gambling.

Michael Chan brought the complaint (PDF) in the U.S. District Court for the District of Massachusetts on July 28, naming DraftKings Inc. and Gus III LLC as defendants.

Chan, who seeks class action status for all others similarly situated, says DraftKings defrauded consumers with the release of its DraftKings Predictions, which was simply a means of evading state gambling laws in order to cause significant financial harm to those states’ residents for the sake of profits.

DraftKings Gambling Addiction

DraftKings and other online sportsbooks, including FanDuel and BetMGM, rose to prominence following a 2018 U.S. Supreme Court decision that lifted a federal ban on sports gambling. The ruling allowed individual states to decide whether to legalize sports betting within their borders. Since then, numerous states have legalized the use and promotion of online sportsbooks. These platforms allow consumers to wager on game outcomes, individual player performances and other variables, often offering live betting opportunities while games are underway.

Along with online sports betting’s popularity has come increasing concerns over gambling addiction rates, which appear to be rising among young adults and college-age men in particular. Experts note that this demographic consists of individuals who are often on their own for the first time and are just learning how to manage their own finances. In addition, college-age individuals in the U.S. have grown up with instant online transactions and are often more comfortable using such services than most other Americans.

Sports betting platforms have faced criticism for using aggressive promotions that may encourage consumers to gamble more frequently. Many platforms are also accused of using data-tracking algorithms to personalize advertising based on individual user behavior and preferences. Additional concerns have been raised about sportsbooks operating or offering gambling-related services in states where they have not been approved. These tactics are blamed for massive financial losses, which can escalate quickly before others realize the person has developed a gambling addiction.

In light of these concerns, a series of DraftKings lawsuits and FanDuel lawsuits have been filed by individuals nationwide, each raising similar allegations that the platforms and similar operations are intentionally defying state laws and fostering gambling addiction in consumers.

DraftKings Predictions Gambling Allegations

Chan’s lawsuit warns that DraftKings, which has already been accused of illegally promoting its services in states like California, has now rolled out a “predictions market” version of its sportsbook app.

Predictions markets, like Polymarket and Kalshi, allow wagering on a wide variety of topics. Although the classification faces numerous legal challenges, predictions markets have, to date, been protected from illegal gambling lawsuits due to claims that the wagers are derivatives, similar to investments, and thus do not count as gambling products.

While the legal viability of this theory is still being tested in courts nationwide, Chan’s lawsuit claims that DraftKings Predictions, which launched last year, is a transparent attempt to promote sports gambling in states where it is not legal. The lawsuit notes that wagers on DraftKings’ prediction markets app are substantially no different than betting on the company’s sportsbook app.

“DraftKings’ sports ‘predictions’ are sports bets masquerading as event contracts. By branding the product as ‘trading’ rather than betting, DraftKings misleads consumers into believing the activity is lawful and safe. It is neither.”

– Michael Chan v. DraftKings Inc. et al.

According to Chan, the company takes advantage of that confusion to reap massive profits, even where sports betting is not technically legalized. The lawsuit notes that in June 2026 DraftKings reported it had overseen about $11.3 billion in total trading volume over the last year, with 66% of that coming from sports betting through DraftKings Predictions.

Of that 66%, nearly 70% of those wagers came from states where sports betting is illegal, the lawsuit indicates. This activity means DraftKings is operating as an unlicensed sports betting enterprise in those states, violating numerous gambling prohibitions and consumer protection laws.

Chan’s lawsuit points out that DraftKings Predictions is available in California, Alabama, Minnesota, New Mexico, South Carolina and other states that have not legalized sports betting, with some states’ attorneys general threatening or going through with legal action against the company.

The lawsuit seeks class action status and compensation for those who used DraftKings Predictions in states where sports betting is illegal. Chan presents claims of unjust enrichment and violation of California’s Unfair Competition Law.

Sports Betting Addiction Lawsuits

While this DraftKings complaint is a class action, most sports betting lawsuits have been filed by individuals. Each plaintiff claims online sportsbooks use sophisticated data analytics and behavioral algorithms to monitor users’ betting habits and deliver personalized promotions intended to encourage more frequent wagering and larger bets.

Sports betting addiction lawyers are currently reviewing claims for individuals nationwide who have suffered substantial financial and mental health damages linked to sportsbook gambling addiction caused by the marketing practices and promotional incentives presented by online wagering platforms including:

Individuals who suspect they developed a gambling addiction or suffered significant financial harm due to the action of these platforms can request a free case evaluation to determine whether they may be eligible to pursue a sports betting lawsuit. Attorneys handling these cases work on a contingency fee basis, meaning there are no upfront legal fees and compensation is owed only if a recovery is obtained.

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