The National Basketball Association (NBA) and major sports, media, and tech companies are facing a class action lawsuit over their investment in and/or involvement with daily fantasy sports sites DraftKings and FanDuel. It’s alleged that DraftKings and FanDuel have “engaged in illegal gambling and deceptive practices” under Florida and federal laws. What’s more, the lawsuit contends that the 50 or so defendants named have been complicit in the operation.
First reported by Sports Illustrated, the lawsuit was filed by two Florida-based daily fantasy sports customers, Antonio Gomez and John Gerecs. Their lawyer, Ervin Gonzalez, has stated that, in particular, the NBA and Major League Baseball are perhaps among the most culpable.
Gonzalez wrote in the complaint: “The NBA recently held itself out as an entity that staunchly rejects betting on its games when former NBA official Tim Donaghy resigned from his job…[now it has] gone so far to legitimize FanDuel by having one of its employees, the NBA President of Global Operations, Mr. Sal LaRocca, serve on FanDuel’s Board of Directors and become an official partner of FanDuel…”
This same charge of hypocrisy has been leveled at MLB. But while the investment arms of several major sporting leagues have been named as defendants, the NFL is notably absent from this lawsuit, perhaps because it has not made an investment in any daily fantasy sports team.
Entertainment companies and organizations like The Kraft Group (which is owned by New England Patriot’s owner Robert Kraft), Legends Hospitality, and MSG Sports and Entertainment are included in the lawsuit. Turner Sports, Time Warner, NBC Sports, Comcast Ventures, 21st Century Fox, and Fox Sports Interactive Media are also named.
According to reports, Gonzalez is pursuing legal claims based on theories of negligence, breach of contract, and even racketeering.
But it’s not just sports leagues that are being sued — also implicated are payment companies, including credit card providers and the tech companies that facilitate distribution of funds, such as PayPal, Paysafe, and Vantiv.
This isn’t the first time the plaintiffs have gone after daily fantasy sports teams. In October, the duo filed a lawsuit directly against DraftKings and FanDuel, alleging that the companies duped them and the “average consumer” into entering these contests, claiming that the daily fantasy sports sites allowed “Apex Predator” or “Shark” bettors (also known as elite players) to take unfair advantage of them. It’s believed that Gomez and Gerecs sought $5 million in damages.
It has been a rough couple of months for the daily fantasy sports industry as these companies find themselves being scrutinized not only in lawsuits, but also by regulators. In October, Nevada’s gaming authorities ordered the companies to shut down, on the grounds that they were unlicensed in the state. DraftKings and FanDuel are under investigation by the New York Office of the Attorney General, and now the state of Florida is cracking down on the industry.
Yahoo has not found itself immune from all of this. In July, the company debuted its own daily fantasy sports league, but just this week it was reportedly added as a new target in the New York probe.
DraftKings struck back at the New York investigation on Friday at a press briefing. The company’s outside counsel, David Boies, said: “New York law expressly permits New Yorkers to pay entry fees to contest for fixed prizes. New York law even expressly permits New Yorkers to wager on contests of skill in which they personally participate. Anyone who has ever played a daily fantasy sports contest knows that this is a contest of skill.”
How this whole thing will play out still remains unknown, as DraftKings, FanDuel, and even Yahoo find themselves fighting a battle on multiple fronts. But with this latest class action lawsuit they are joined by their investment partners, and that could wind up making this very interesting. Will the MLB, NBA, NHL, Major League Soccer, and everyone else named as defendants in this new lawsuit toss daily fantasy sports companies under the proverbial bus?
The Gomez and Gerecs lawsuit is being heard in the U.S. District Court for the Southern District of Florida.
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