Daily sports fantasy sites in court arguing legality of gambling

A class action lawsuit was filed in South Florida against approximately 50 entities with ties to the daily fantasy sports industry. DraftKings and FanDuel have been accused of promoting illegal gambling and companies that have invested in daily fantasy sports helped facilitate illegal activities.

Damages being sought include:

• damages suffered by the plaintiff and the proposed class
• restitution of money wrongfully obtained
• an injunction ending the operation of DraftKings and FanDuel
• an order of declaratory relief preventing the companies from continuing any illegal gambling

And across the country, the same companies are in court arguing the legality of their gambling. One plaintiff has accused DraftKings and FanDuel of “being ringleaders in a mafia-style racketeering ring.”

Daily fantasy sports was in the spotlight in October when a DraftKings employee won $350,000 in a FanDuel contest. This raised questions about the possible unfair advantage the employee had. Then New York Attorney General Eric Schneiderman argued that daily fantasy sports now falls under illegal gambling in New York and has bid to shut down the companies’ betting operations. . The argument in a current hearing centers around if people using the sites are gambling on games of chance (which would be illegal) or on skill (which is legal).

John Kiernan, a lawyer for DraftKings, said the payment involved with using the site is not a wager and that players are not “risking something of true value.” And in a statement, the company said it has been operating legally in New York for the seven years that New Yorkers have been using their site.

Schneiderman wrote that “unlike most traditional, season-long fantasy sports sites, which make most of their money from administrative fees and advertising, FanDuel and DraftKings take a cut of every bet,” explaining “that is waht bookies do, and it is illegal in New York.”

One potential economic impact of the ruling is tied to the advertising dollars spent by fantasy firms – a whopping $134M was spent on television advertising in Q3. FanDuel and DraftKings are valued at $1.3 billion and $1.2 billion, respectively.