DraftKings Lawsuit Indicates ‘Event Contracts’ Are Nothing More Than Sports Bets

Rapid growth of mobile sports betting has raised concerns about gambling addiction, particularly among young adults and college-age men.

A South Carolina man has filed a lawsuit alleging DraftKings and other prediction market operators are illegally offering sports betting in the state through financial “event contracts” that function no differently than traditional sportsbook wagers.

The complaint (PDF) was brought by James M. Hughes in the South Carolina Court of Common Pleas on July 29, naming DraftKings Inc., DraftKings Predictions, Railbird Exchange LLC and a number of other prediction market operators, exchanges, clearinghouses and trading firms as defendants. The case was removed to the U.S. District Court for the District of South Carolina on September 2. 

Hughes claims the companies created an elaborate financial structure that allows South Carolina residents to wager on sporting events, despite sports betting having been illegal in the state for more than a century. 

Online Sports Betting Concerns

Online sports betting has expanded rapidly across the U.S. since a 2018 Supreme Court ruling allowed individual states to decide whether to legalize and regulate the activity. Platforms operated by companies such as DraftKings, FanDuel and BetMGM now allow consumers in many states to place wagers from their phones on game outcomes, individual player statistics and events that unfold during live contests.

However, the rapid growth of mobile wagering has also raised concerns about sports betting addiction, particularly among young adults and college-age men. Researchers indicate individuals in this age group may be especially vulnerable because they are often managing their own money for the first time while already accustomed to making quick financial transactions through mobile apps.

In addition, critics have raised concerns about sportsbook marketing practices, including personalized promotions, targeted advertisements and live betting features that may encourage consumers to place wagers more frequently. Questions have also emerged over whether companies are using new products, such as prediction markets and event contracts, to offer sports-related wagering in states where traditional sportsbooks are prohibited or subject to licensing requirements.

Addiction experts and families warn that consumers may accumulate significant financial losses before compulsive gambling behaviors become apparent. Those concerns have contributed to a series of DraftKings lawsuits and FanDuel lawsuits alleging online betting companies employ deceptive, predatory or unlawful practices that encourage excessive wagering.

DraftKings Prediction Market Allegations

Prediction markets allow users to buy and sell “event contracts” based on whether particular events will occur, including election results, economic developments and sporting events. Operators of prediction markets argue these contracts are regulated by the U.S. Commodity Futures Trading Commission (CFTC), rather than individual states. As a result, DraftKings maintains federal law preempts Hughes’ claims under South Carolina gambling laws.

However, Hughes argues prediction market users can wager on whether a team or athlete will win a contest, which he indicates amounts to traditional sports betting presented as financial trading.

Hughes claims DraftKings Predictions allows South Carolina residents to open accounts and place wagers on Major League Baseball, NBA, NHL, college football and other sporting events, noting that the first 11 of 17 market categories displayed on the platform are sports-related. He maintains DraftKings has increasingly emphasized sports as it expands its prediction market business.

“The rhetorical set dressing of ‘prediction markets’ and ‘event contracts’ doesn’t change reality. And reality is quite simple. Defendants incite, offer, and collect winnings from illegal wagers placed by South Carolinians on the outcome of sporting events.”

— James M. Hughes v. Draftkings Inc. et al.

According to the lawsuit, DraftKings Predictions describes its app as “built for sports fans” with a “sports focus,” and has identified the 2026 FIFA World Cup as a “key demand driver.” Hughes also points to promotions offered to South Carolina consumers, including $200 in “Prediction Dollars” after a new customer makes a trade of at least $5 and $150 after spending $5 on baseball predictions.

Prediction Market Gambling Recovery Claims

Hughes brings the lawsuit under South Carolina’s Statute of Anne. Under the law, individuals who lose more than $50 through gambling may seek to recover their losses. If they fail to bring a claim within three months, the statute allows another person to pursue the money, along with three times the amount lost and litigation costs. 

The filing acknowledges that Hughes has never personally bet on sports or suffered gambling losses involving the defendants. Instead, he seeks to use the statute to recover money allegedly lost by other South Carolina residents. 

The complaint claims thousands of South Carolina residents have lost more than $50 at a time through the defendants’ prediction markets and seeks an accounting to determine the total amount collected.

Hughes is asking the court to award four times the value of the allegedly illegal gambling winnings and issue an injunction preventing the defendants from continuing the challenged operations in South Carolina. 

Sports Betting Addiction Lawsuits

A number of sports betting lawsuits have been filed by individuals who allege online gambling platforms contributed to compulsive wagering, mounting debt and other financial problems for them and others. The claims often maintain that sportsbooks collect extensive information about customers’ betting patterns and behavior, then use that data to deliver individualized promotions and incentives that encourage continued gambling.

Sports betting addiction attorneys are reviewing potential claims for individuals who experienced significant financial losses or psychological injuries after developing problematic gambling behaviors allegedly fueled by sportsbook promotions and rewards. Companies that may be involved in these claims include:

Individuals who experienced serious gambling-related losses can request a free and confidential case evaluation to determine whether they may be eligible to pursue a sports betting addiction lawsuit. These claims are handled on a contingency fee basis, meaning there are no upfront legal fees or expenses.

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