FanDuel, DraftKings Hit With Fantasy Sports Class Action Lawsuit

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Fantasy sports companies FanDuel and DraftKings are faced with a class action lawsuit alleging their employees used insider information to play on competitor sites, therefore stacking the odds against average players.

Plaintiff Adam Johnson filed the class action lawsuit after he deposited $100 to play on the DraftKings website. He later found out that employees with knowledge of internal data were winning large amounts of money on other Daily Fantasy Sports (DFS) websites, acting in collusion with each other.

The fantasy sports class action lawsuit is the first to be filed following an admission by DraftKings employee Ethan Haskall inadvertently leaking private information on contests before the lineups were locked, and in that same week he won $350,000 on competitor FanDuel’s fantasy football competition.

Both companies issued statements that their employees were not allowed to play on their own websites. What they failed to disclose is that their employees were not banned from playing other similar websites and compromised the integrity of the whole operation.

Unlike their season-long counterparts, Daily Fantasy Sports websites allow players to participate in daily competitions in fantasy sports games. Players accumulate points based on the real-life statistics of professional sports players and can play for free or can pay to be eligible to compete for cash prizes.

Statistics showed that in DFS tournaments, 91 percent of all profits were won by 1.3 percent of players, according to data analyzed by Sports Business Daily. Because there is some level of skill involved, DFS is not considered gambling. The gaming tends to favor analytical players who like to research data and trends to forecast their fantasy players’ performance.

DraftKings and FanDuel keep huge amounts of data and information including analytics on winning strategies, return on investment and more that has been complied over years. They keep this information private but understand that those who win the most in the tournaments have figured out many of these strategies on their own. This same information, however, was allegedly used by employees as they played on competitor websites, according to the class action lawsuit.

The fantasy football class action lawsuit alleges that employees of DraftKings have won $6 million playing on FanDuel over the few years they have been in existence which amounts to more than $1 million per year. For some DraftKings employees, their winnings on FanDuel have reportedly surpassed their actual salaries.

Johnson’s class action lawsuit brings forth counts of negligence, fraud and misrepresentation, violation of Kentucky Consumer Protection Act, Civil Conspiracy, violations of the New York Deceptive Acts and Practices Law and New York False Advertising Law and unjust enrichment.

“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,” the fantasy sports class action lawsuit says.

While DraftKings’ Terms of Use agreement contains a provision for arbitration, Johnson argues the contract is not valid or enforceable and refers to the promises made by DraftKings as “illusory.”

The plaintiff is being represented by Jasper D. Ward IV and Alex C. Davis of Jones Ward PLC and Paul C. Whalen.

The DraftKings, FanDuel Class Action Lawsuit is Johnson v. FanDuel Inc., et al, Case No. 1:15-cv-07963, in the U.S. District Court for the Southern District of New York.

UPDATE: On June 30, 2016, daily fantasy sports player plaintiffs laid out their grievances in a 273-page consolidated class action lawsuit alleging DraftKings and FanDuel duped players into participating in illegal gambling operations that gave an unfair advantage to their own employees who also participated in the daily competitions.