Fantasy Football giants FanDuel and DraftKings are facing some 40 class action lawsuits alleging the two sites fraudulently coerced players into an illegal gambling scam.
According to the National Law Journal, most of the lawsuits claim consumer fraud and false advertisement as the basis for suit. Plaintiffs are seeking reimbursement for lost fees paid to the websites ranging anywhere from just $0.25 to thousands of dollars.
Some of the suits also claim the companies engaged in insider trading after it was found that employees were participating in Fantasy Football leagues and disproportionately earning winnings based on inside knowledge they obtained through employment.
Some customers allege they would not have signed up for leagues had they known employees were participating. Both sites have since implemented policies forbidding employees from participating.
According to the National Law Journal write-up those scandals erupted when a DraftKings employee accidentally released internal data about a Fantasy Football league before the actual NFL games associated with it began. The result was that employee winning $350,000 from the competing site, FanDuel.
Both sites have been reluctant to comment on lawsuits levied against them. Pinellas County has joined the growing list of places where litigation has been filed against the two Fantasy Football providers.
The difference between FanDuel and DraftKings is that they payout daily or weekly prizes to players while other Fantasy Sports providers don’t. Lawsuits allege that constitutes a violation of the U.S. Unlawful Internet Gambling Enforcement Act.
But the two sites defend their businesses arguing players win or lose based on skill, not chance. Under the federal law, these types of games are permissible if players win based on skill rather than luck.
The game is played when users select “teams” based on real players in the NFL. How well that person’s team does is based on the actual players’ performances in real games. Fantasy Football has become so popular some non-football fans even play just for professional networking opportunities.
Despite the popularity, FanDuel and DraftKings have become a target for many state officials and attorneys. Nevada barred the websites from operating until they file for gambling status. Much of the controversy was sparked with New York’s Attorney General began looking into potential illegal gambling activity.
Lawyers on both sides of the argument are now trying to coordinate the class action lawsuits filed in 13 states to have them heard in multidistrict litigation.
A multidistrict litigation panel isn’t expected to hear arguments for merging cases until January 28 in Fort Myers.
