DFS Player Sues DraftKings and FanDuel

We had to know this was coming. In one of the most obvious instances of bandwagoning/piling on of all time, a Kentucky man has filed a class action lawsuit against FanDuel and DraftKings, the two leading daily fantasy sports (DFS) sites and the focal points of the recent “insider trading” controversy.

The situation probably doesn’t need to be reviewed, but *to review*, DraftKings employee Ethan Haskell recently posted NFL player usage information on the DraftKings blog early, the same week he won $350,000 in an NFL contest on FanDuel. People in the DFS community were upset that Haskell had this information when he did and were afraid that he might have used the “inside information” to gain an advantage on FanDuel. The scandal has since exploded, with major news outlets running with it and both the New York and Massachusetts Attorneys General launching investigations.

DraftKings has said that it has conducted an internal investigation and has found that Haskell did not have access to the information until well after his FanDuel roster was locked, meaning he could not have had an unfair advantage. DraftKings and FanDuel have also decided to prohibit their employees from playing at any DFS site for real money.

Even though the facts we know to this point have not indicated any wrongdoing (and more could certainly be revealed in time that either show Haskell, DraftKings, and/or FanDuel did do something wrong or further prove they did not), Adam Johnson has sued the two DFS sites, anyway, claiming that not only is it possible that DFS site employees had access to inside information, but that this information was, in fact, used to win money in contests.

Johnson says he deposited $100 on DraftKings, but would have balked at the opportunity to make a deposit if he knew that “defendants were working in concert to allow employees of DFS sites to play against them.”

Of course, this makes it sound like employees of the sites were scheming against the non-employee players, using lineup data to win millions at the expense of those out of the loop. The whole lawsuit comes off as whiny, as a way to take advantage of the current hysteria to try to get back money Johnson lost playing daily fantasy sports. Take, for instance the thread of logic employed on page 2 of the suit:

6. DraftKings refers to its new users as “fish” and relies on new users who lack skill to keep its most active users – and therefore profitable entry fee generators – on their site. According to one analysis, the top 1.3% of players paid 40% of the entry fees, and the most active 6.3% of players paid 76% of entry fees.
7. The CEO of FanDuel also recognized the need to attract as many new, inexperienced players as possible to keep its most profitable players happy.
8. These material misrepresentations and omissions fraudulently induced Plaintiff and the proposed classes to give Defendants money, which ultimately went to Defendants and their employees through fees and contest prizes.

It is as if Johnson has no idea how gambling (or “gambling,” as it were) works. Like he’s so shocked to find out that he was one of the fish that he had to sue to save face. Like he expected the DFS sites to advertise that they needed losing players to keep the ball rolling.

Later in the suit, Johnson cites a post DraftKing’s CEO Jason Robins made on Rotogrinders.com in which he discussed the importance of having strong internal controls to prevent fraud and maintain the integrity of the games. For something that is being used as evidence against Robins, it actually paints Robins and DraftKings in a positive light. But Johnson and his attorneys just focus on the word “fraud,” like it means that fraud has actually been perpetrated by the site:

33. In that post, Robins uses the word “fraud” or “fraudster” nine times. Robins also discussed how sophisticated its data analysis and fraud prevention efforts were, including tracking users by their Internet Protocol, or IP, addresses. Thus, DraftKings could easily monitor users who worked for FanDuel or other sites to determine their winnings and whether there existed the possibility they were using inside information.

Ok, yes. Good for you for counting. Not sure how that is a negative.

Perhaps the most blatant example of Johnson stating as fact that something untoward has been going on at the DFS sites when nothing bad has actually been proven when he gets to the point on page 11 (emphasis added):

37. Had Plaintiff and/or members of the proposed classes known that Defendants had acted in concert to sanction this practice, Plaintiff and members of the proposed classes would not have played on Defendants’ websites.
38. Overall, Plaintiff deposited $100 on DraftKings before the disclosure of the fact that DFS employees were playing with inside information.

Again, there is no evidence yet that anyone used inside information to gain an advantage, but Johnson states it as fact.

The lawsuit accuses the two leading DFS sites of such charges as Negligence, Fraud and Misinterpretation, Civil Conspiracy, and Unjust Enrichment.

DraftKings and FanDuel, or at least employees of the sites, may very well have engaged in deceptive practices. They very well may have cheated their customers. If they did, they should get what’s coming to them. But at this point, all of that is only a possibility, not a definitive. Right now, nothing has been proven besides Haskell screwing up and posting information early, which is why this lawsuit comes off as a desperate bandwagon attempt at squeezing money out of the DFS sites.


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