Anyone who’s watched football has seen the daily fantasy sports commercials dozens of times; during the 2015 NFL season, they were as omnipresent as the grumbling Monday morning quarterback in your office. But was there truth in advertising?
According to a recent private class action lawsuit, not exactly.
We spoke with attorneys
who are not associated with the case about why they’re keeping a close eye on the outcome.
“The class action plaintiffs claim that the two largest daily fantasy sports websites—DraftKings and FanDuel—engaged in fraud, deceptive practices and false advertising to get unsuspecting consumers to play and lose money,” says Southold class action attorney Joseph Tusa
“The claim that the defendants let insiders play in the game against ‘average Joes’ directly addresses fundamental unfairness,” says Mark Rifkin
, a securities litigation attorney in Manhattan. “FanDuel and DraftKings are dealing with state regulators all around the country on these same issues.”
From there, the playbook gets even more complicated. According to Tusa, the plaintiffs also allege that both sites violated the federal RICO (racketeering) statute in connection with a host of third parties—including professional sports leagues, broadcasters and investors—which means, for the average fantasy player, the end zone might have been a lot further out of reach than 100 yards.
Manhattan class action attorney Jessica Sleater
adds that employees for the sites are among the alleged insiders of the daily fantasy sports contests and sports betting.
“Depending on gambling laws state by state, there is going to be some form of regulation on this stuff,” she says. “From the class action standpoint, typically it would involve increased disclosure to consumers if, in fact, there is a conflict of interest—that employees participating on the sites are using their knowledge, which could potentially affect the odds for the average player.”
The class action is still in early stages, but all New Yorkers who’ve spent money to play on Draft Kings or FanDuel fantasy sports sites could potentially be members. In February 2016, the Judicial Panel on Multidistrict Litigation consolidated all the cases into a single case in the U.S. District Court of the District of Massachusetts.
“On June 30, 2016, the cases collectively filed a 273-page consolidated consumer class action complaint, with 24 separate counts,” Tusa says. While DraftKings and FanDuel had not yet responded at press time, he says it’s likely that they’ll file motions to dismiss and try to force the cases out of court and into arbitration.
“It’s kind of an unusual class action in that in a typical false advertising claim, damages would be awarded based on what the product is advertised as and what it actually is,” Sleater says. “But in this case, because the players are taking a chance, the damages might be a little difficult to determine.”
“[Daily fantasy sports] is a relatively nascent industry,“ Tusa says. “This aggregation of private lawsuits marks the first time proposed classes of customers of DraftKings and FanDuel have sued the DFS industry claiming the games were unfair and promoted using deceptive advertising. But the legal theories aren’t novel. At the same time these class actions are proceeding, a number of states have issued regulatory opinions or engaged in court proceedings to stop the DFS industry from engaging in what they claim is illegal gambling.”
Rifkin says fantasy sports gaming’s explosion in popularity has heightened the importance of the case. “Fantasy sports games change the way people interact with sports teams, and therefore the case can have a far-reaching impact,” he says.
However, given that Gov. Cuomo signed a bill legalizing DFS in New York state law on August 3, the possibility that the class action itself could put a stop to daily fantasy sports in New York is a Hail Mary. “It’s unlikely the private class actions would bar the DFS sites from operating in New York,” says Tusa.
For more information on this area of law, see our overview of consumer law.