FanDuel, DraftKings Face Another ‘Insider Trading’ Class Action

Last week, another class action lawsuit was filed against fantasy sports websites FanDuel Inc. and DraftKings Inc. over allegations that the sites tipped the odds of winning in their favor and duped thousands out of their betting dollars.

Lead plaintiffs, Florida residents Antonio Gomez and Ricardo Alejandro Garcia, allege in their class action lawsuit that the online sports betting companies skewed the algorithms to gain an unfair advantage over their customers. The plaintiffs seek to represent all those who have been allegedly duped by FanDuel and DraftKings.

“While any player may get lucky on the back of a handful of entries into defendants DraftKings’ and FanDuel’s games, over time nearly all of the prize money flows to a tiny elite equipped with elaborate statistical modeling and automated tools that can manage hundreds of entries at once and identify the weakest opponents,” the plaintiffs allege in their fantasy sports class action lawsuit.

“These elite players are known in the fantasy sports gaming industry as ‘Apex predator’ bettors or ‘Shark’ bettors,” the plaintiffs continue. These “Apex predator bettors” and “Shark bettors” then “use elaborate computer programs and algorithms called ‘robots,’ ‘scrapers,’ ‘sniping software,’ ‘scripts’ and other methods to gain an unfair advantage over unsuspecting class representatives and class members,” according to the class action lawsuit.

Alleging that the companies have allowed such users to play the games with the aid of their computer programs and algorithms, but have never disclosed that information to the general public, the plaintiffs compare the practice to “insider trading.”

By filing the fantasy sports class action lawsuit, the plaintiffs seek to represent separate classes of people who were allegedly duped by FanDuel and DraftKings. The plaintiffs are also seeking monetary damages they contend exceed $5 million, actual damages, interest as well as a jury trial.

This fantasy sports class action lawsuit joins two others filed earlier this month alleging that employees of these online sports betting companies used insider information to play on competitor sites, therefore stacking the odds against average players. The class action lawsuits stem from statements made by a DraftKings employee who says he leaked non-public betting data and also won hundreds of thousands playing in rival FanDuel’s online sports betting contests.

State and federal probes have also begun and politicians have issued statements indicating they plan to follow the matter closely and plan to petition regulators to consider additional rules for the online sports betting industry. They also chastised the National Football League for discouraging sports betting on the one hand, but encouraging and even entering into agreements with FanDuel and DraftKings.

In the aftermath of this class action lawsuit and other allegations, DraftKings and FanDuel have said that their employees will be banned from playing daily fantasy sports at either company for money.

The plaintiffs are represented by Ervin Amado Gonzalez and Patrick Shanan Montoya of Colson Hicks Eidson, Christos Lagos of Lagos & Priovolos PLLC, and John Priovolos of John Priovolos PA.

The FanDuel, DraftKings Fantasy Sports Class Action Lawsuit is Gomez, et al. v. FanDuel Inc., et al., Case No. 1:15-cv-23858, in the U.S. District Court for the Southern District of Florida.

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.