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Potential Class Action Lawsuit Against DraftKings

draftkings lawsuit

Jazlowiecki & Jazlowiecki, a Connecticut law firm, has been retained by a CT resident seeking to file a lawsuit to recover damages against DraftKings, based upon the recent news and allegations of “fraud” and “insider information trading” committed by the popular and rapidly growing company. If you have participated in any weekly or daily fantasy games operated by DraftKings and wish to consult an Attorney to understand your legal rights or to have any questions answered, please do not hesitate to contact Jazlowiecki & Jazlowiecki via email or by phone at (860) 674-8000. You may be eligible to join a potential class action lawsuit against DraftKings. Any information obtained and any communications made will be strictly confidential.

Helpful Links:

Sports Illustared: Legality of DraftKings & Fanduel

NY Times: Scandal Erupts over DraftKings and FanDuel

ESPN: Biggest Question on DraftKings Data Leak

NY Times: FanDuel and DraftKings Are Not Your Friends

ESPN: NY AG to Investigate DraftKings Scandal

What is DraftKings:
DraftKings is incorporated in Delaware and headquartered in Boston, Massachusetts. They are recognized as one of the leaders of the daily and weekly fantasy sports industry. The company allows customers to enter daily and weekly fantasy sports related contests and earn money based on individual player performances. They are particularly popular among NFL fans. They are valued at over one billion dollars. DraftKings has many large corporate partners, including Major League Baseball and several NFL owners including Robert Kraft of the New England Patriots. The company has an exclusive $250M advertising contract with the American sports network ESPN and a $250M non-exclusive advertising deal with Fox Sports. ESPN has stated due to the recent allegations of fraud that they will be pulling their in-broadcast sponsored DraftKings segments.

Who is FanDuel:
FanDuel is almost identical to DraftKings. Their Headquarters are in New York City. FanDuel has joined DraftKings in saturating TV and Radio with advertisements often suggesting that you can deposit $5 and turn it into Millions!

How do the Sites Operate:
Essentially, people sign up by depositing money into DraftKings accounts via paypal or credit card. They are entered into “Leagues.” You, the user, draft players who are assigned monetary values. For example, you might draft Tom Brady to your DraftKings team/roster for $1000, while a lesser quarterback might be drafted for $500. You have a budgeted salary cap, thus you are not able to just draft all of the best/most expensive players. You use your budget to carefully draft a team. Then, based on the actual players’ real life performances, you are competing against other users that have drafted their own teams. The contests usually last only for a day or for a week, unlike standard fantasy leagues that last the entire season. Quick deposits, quick contests, and if you’re lucky, quick payouts.

What Happened:
The New York Times broke the story where a DraftKings employee won$350,000.00 on FanDuel this week. The DraftKings employee, Ethan Haskell, had access to DraftKings ownership data, meaning that he may have seen which NFL players had been selected by DraftKings users, and by how many users. That would have helped him select his own lineup on FanDuel, because the two sites are almost identical and typically have the exact same “price” for each player in a given week. The Times compares what Haskell did to insider trading. Many have complained that the odds are stacked against non-insider users (if not outright rigged) as the playing field is not level whatsoever.

How Have the Companies Responded:
From both the DraftKings and FanDuel Websites:

“Nothing is more important to DraftKings and FanDuel than the integrity of the games we offer to our customers. Both companies have strong policies in place to ensure that employees do not misuse any information at their disposal and strictly limit access to company data to only those employees who require it to do their jobs. Employees with access to this data are rigorously monitored by internal fraud control teams, and we have no evidence that anyone has misused it. However, we continue to review our internal controls to ensure they are as strong as they can be. We also plan to work with the entire fantasy sports industry on this specific issue so that fans everywhere can continue to enjoy and trust the games they love.”

Legality of the Sites: Even prior to these fraud allegations, many have questioned the legality of these one-week fantasy payout leagues. 14-term U.S. Congressman Frank Pallone, Jr. (D-NJ) Pallone is the Ranking Member of the House Energy and Commerce Committee, which has jurisdiction over issues pertaining to energy, environment, health care, telecommunications and — the big one— commerce. 2 weeks ago, Congressman Pallone requested that the Committee hold a hearing to review the legal status of daily fantasy sports.

There is a federal ban on internet gambling under the Unlawful Internet Gambling Enforcement Act. This was passed in 2006 and essentially ended the On-Line Poker Boom of the early 2000’s. These DraftKing and FanDuel Leagues, however, claim to be exempt based on exceptions to the Act. Namely,
(I) All prizes and awards offered to winning participants are established and made known to the participants in advance of the game or contest and their value is not determined by the number of participants or the amount of any fees paid by those participants.
(II) All winning outcomes reflect the relative knowledge and skill of the participants and are determined predominantly by accumulated statistical results of the performance of individuals (athletes in the case of sports events) in multiple real-world sporting or other events.
(III) No winning outcome is based— (aa) on the score, point-spread, or any performance or performances of any single real-world team or any combination of such teams; or (bb) solely on any single performance of an individual athlete in any single real-world sporting or other event.

The key question in regards to Daily fantasy Leagues is whether winning is based predominantly on skill or chance aka luck.

These leagues are for now, legal, in 45 of the 50 United States, including Connecticut.

Separate False Advertising Claims:
Also, back in February, Miami-based attorney Mason Kearns filed a class action lawsuit in the United States District Court for the South District of Florida in January alleging that Boston-based DraftKings, Inc. violated the Florida Deceptive and Unfair Trade Practices Act by deceptively using the term “free” in its advertisements and making false and misleading statements intended to induce consumers into depositing money to the website.

NY Attorney General Now Investigating:
(From ESPN) New York Attorney General Eric Schneiderman announced he has launched an inquiry into DraftKings and FanDuel on Tuesday night to look into possible advantages daily fantasy company employees might have gained by using the data of their company to win prizes in contests offered by a competitor. In letters that Schneiderman’s office says it sent to FanDuel CEO Nigel Eccles and DraftKings CEO Jason Robins, which have been shared with ESPN.com, Schneiderman asks the two if they could provide names and titles of employees who compile player data, set roster values, deal with ownership percentages for pending and historical contests and aggregate the success of players who play on their sites. Schneiderman is seeking this data covering the last year. The industry came under scrutiny when it was widely learned that DraftKings employee Ethan Haskell published data revealing what players were included on most rosters. The next day, Sept. 28, Haskell finished second in a million-dollar fantasy contest on competing daily fantasy site FanDuel and won $350,000.

Jazlowiecki & Jazlowiecki has been retained by a CT resident, who is seeking to file a lawsuit to recover damages against DraftKings, based upon the recent news (from the NY Times) and allegations of “fraud” and “insider information trading” committed by the popular and rapidly growing company. If you have participated in any weekly or daily fantasy games operated by DraftKings and wish to consult an Attorney to understand your rights and to possibly join a potential class action lawsuit, or to have any questions answered, please do not hesitate to contact Jazlowiecki & Jazlowiecki via email or by phone at (860) 674-8000. Any information obtained and any communications made will be strictly confidential.

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