Allegation: Fraud & illegal conduct
Lieff Cabraser represents consumers in national fraud litigation for “insider trading”-type behavior within the “legal yet wildly unregulated, heavily criticized” world of Daily Fantasy Sports (“DFS”).
In February 2016, the Judicial Panel on Multidistrict Litigation announced that the lawsuits against fantasy sports companies FanDuel Inc. and DraftKings Inc. will be coordinated in federal court in Massachusetts. The JPML acknowledged that while the myriad of cases don’t all share the same underlying theory of liability, combining them in Massachusetts will promote efficiency and the overall management of the cases.
The Panel noted that 80 separate actions have been consolidated or identified as related. Although the cases involve differing claims, they are likely to require testimony from many of the same DraftKings and FanDuel employees. Lieff Cabraser partner Brendan Glackin, who represents plaintiff Alem Belton, noted that the Panel’s order was “absolutely right in terms of the analysis.” Belton was a supporter of the creation of the Massachusetts MDL.
The Daily Fantasy Sports Scandal
As reported by the New York Times, “[a] major scandal is erupting in the multibillion-dollar industry of fantasy sports, the online and unregulated business in which players assemble their fantasy teams with real athletes.” On October 5, 2015, the two leading companies in the fantasty sports industry were forced to release statements defending their businesses’ integrity after revelations of activity that is being described as effectively insider trading within the industry — that an employee of DraftKings, one of the two major companies in the DFS world, had won over $300,000 by placing bets at rival site FanDuel using information not generally available to the public.
As the Times went on to note, the incident “has raised questions about who at daily fantasy companies has access to valuable data, such as which players a majority of the money is being bet on; how it is protected; and whether the industry can — or wants — to police itself.”
What Are Daily Fantasy Sports?
The DFS industry has its origins in informal fantasy games that started decades ago with fans playing against each other for fun concurrent with the regular pro sports seasons.
Industry leaders DraftKings and FanDuel have created online versions of those games where large numbers of fans have to pay website entry fees from as little as $0.25 to as much as a thousand dollars to compete for prize pools that can pay literal millions to the winner.
DFS websites such as DraftKings and FanDuel are inherently competitive sites that supposedly have a level playing field, where each participant uses only his or her knowledge or expertise of the sport and players in question to win. If a participant has inside information about the way the site works and acts on that information, the participant gains an upper hand unrelated to his or her knowledge or expertise of the sport. Other players who do not have this inside information, cannot obtain it by better educating themselves on the sport, and who play the game with the expectation that no one else has inside information, might be at a disadvantage.
So when an employee from site A uses insider information he has (for example, if an employee has raw data or knows how the software algorithms are set) to gamble on site B and wins money, those winnings could effectively be coming at the expense of all the other site B customers who don’t have access to the inside information. Absent the employees having inside information, at least some of the participants who did not have this inside information who lost money might instead have won money, or might have won much more money.
If some participants in these online games are leveraging secret proprietary information, many authorities are beginning to see that behavior as similar to illegal insider trading in the securities world.
Contact National Consumer Rights Attorneys at Lieff Cabraser
If you are a Daily Fantasy Sports player and have lost games you feel may be a result of this or other inside information practices, we welcome an opportunity to discuss your experiences. Please call us at 800 541-7358 or use the form below. There is no fee or obligation for our review of your potential case, and all information will be held in strict confidence.
We will review your claim without fee or obligation, and Lieff Cabraser agrees to protect your name and all confidential information you submit against disclosure, publication or unauthorized use to the full extent under the law.