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Class-action lawsuit filed against DraftKings, FanDuel

9 October 2015

The soap opera-like week for daily fantasy sports continued on Thursday and Friday as a class-action lawsuit was filed against the two industry giants — DraftKings and FanDuel — while the former tried to temper the controversy by e-mailing a message directly to its players, signed by the three co-founders.

The scandal exploded earlier this week when it was revealed a DraftKings employee may have used internal data to gain an unfair advantage in a Week 3 Millionaire Maker tournament on competitor site FanDuel in which he won $350,000.

After days of multiple allegations, inquiries from attorneys general and a whole new set of questions about whether or not the industry should be regulated, DraftKings and FanDuel were named the defendants in U.S. District Court for the Southern District of New York in a class-action lawsuit on Thursday titled Johnson v. FanDuel, Inc. et al.

According to LegalSportsReport.com, the seven claims in the lawsuit, which names Kentucky resident Adam Johnson as the plaintiff, include negligence, fraud and misrepresentation, civil conspiracy and unjust enrichment. The list of damages being sought included "restitution to Plaintiff and the proposed classes of all monies wrongfully obtained by Defendants" and "injunctive relief requiring Defendants to cease and desist from engaging in unlawful, unfair, and/or deceptive practices alleged in the Complaint."

According to nationally recognized sports and gaming lawyer Daniel Wallach, this could just be the beginning for DraftKings and FanDuel.

Wallach, who has counseled professional sports teams, fantasy sports operators, racetracks and other gaming industry participants, wrote on Twitter last night that we should expect "more class action lawsuits" citing "no inside knowledge, but these things don't just stop at one." Wallach went on to explain "the first lawsuit gets all the ink, but perfect plaintiff (someone in same pool who would have won more $$) has yet to emerge. But he will."

 DraftKings CEO Jason Robins

DraftKings CEO Jason Robins

DraftKings CEO Jason Robins, who was under fire at last week's Global Gaming Expo (G2E) in Las Vegas defending the DFS industry, has made multiple media appearances this week in the wake of the controversy, but on Friday he reached out to his customers with an e-mail he and his two co-founders, Matt Kalish and Paul Liberman, had signed, saying they wanted to "speak to you directly about what has been going on."

The e-mail went on to say, "The fairness and integrity of our contests has been at the heart of everything we have built since we started the company three and a half years ago," and while their "internal investigation" found "absolutely no wrongdoing" concerning the employee in question, "this has still pushed us to reevaluate our processes . . . Given the pace of our growth, we felt that an audit was critical to ensure the security of our platform, so we hired an external law firm experienced with these issues to conduct a full review."

Below is the entire content of the e-mail, which was addressed personally to each DraftKings member:

As the three co-founders of DraftKings, we want to speak to you directly about what has been going on.

We know that you play DraftKings because it's fun and because it gives you a chance to showcase your skills against millions of other fans, and we know that you cannot do that without a level playing field.

The fairness and integrity of our contests has been at the heart of everything we have built since we started the company three and a half years ago.

Over the past week, questions have arisen around an employee of ours who won a significant prize on a competitor's site. While our internal investigation has reflected absolutely no wrongdoing on his part, this has still pushed us to reevaluate our processes.

Long before this happened, the wheels were in motion for an external review of our policies and procedures. Given the pace of our growth, we felt that an audit was critical to ensure the security of our platform, so we hired an external law firm experienced with these issues to conduct a full review.

But that is not enough. In addition to this audit, we have put in place a set of core measures that we believe are central to this process:

  • We expanded our existing policy prohibiting DraftKings employees from playing on our site to prohibit participation in any public daily fantasy sports contests for money.
  • We also will prohibit employees from any other Daily Fantasy Sports contest operator from participating in games on DraftKings.
  • We are actively reviewing our organizational structure and will add resources to ensure compliance with all recommendations stemming from internal and external findings.
  • We are working with multiple third parties to strengthen all internal policies and procedures.

The events of the past week have caused us to take a broader look and to ask those both here and externally to widen the scope of their analysis of our business.

We are aware that there is room for growth, regardless of the strength of our current platform. We will work tirelessly to improve all aspects of our customer experience, which is every bit as important to us as the effort we put into our product.

You will no doubt continue to hear from the media about both DraftKings and the industry. It is our prerogative to keep driving that conversation ourselves. We will work to respond to your concerns in complete transparency and to inform you of the steps we are taking to inspire your full trust.

Please know how grateful we are for the passion and loyalty you have shown DraftKings throughout our history and especially over the past week. You remain our greatest priority.

Thank you,
Jason Robins, Matt Kalish & Paul Liberman
Co-Founders, DraftKings
Class-action lawsuit filed against DraftKings, FanDuel is republished from Online.CasinoCity.com.
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Best of Gary Trask
Gary Trask

Gary serves as Casino City's managing editor and has more than 20 years experience as a writer and editor.

A member of the inaugural Poker Hall of Fame Media Committee, Gary enjoys playing poker and blackjack, but spends most of his time sitting in the comfy confines of the sportsbook when in Las Vegas.

The Boston native is also a former PR pro in the golf-casino-resort industry and a fanatical golfer, allowing his two favorite hobbies - gambling and golf - to collide quite naturally.

Contact Gary at gary@casinocity.com and follow him on Twitter at @CasinoCityGT.

Gary Trask Websites:

twitter.com/#!/casinocityGT
Gary Trask
Gary serves as Casino City's managing editor and has more than 20 years experience as a writer and editor.

A member of the inaugural Poker Hall of Fame Media Committee, Gary enjoys playing poker and blackjack, but spends most of his time sitting in the comfy confines of the sportsbook when in Las Vegas.

The Boston native is also a former PR pro in the golf-casino-resort industry and a fanatical golfer, allowing his two favorite hobbies - gambling and golf - to collide quite naturally.

Contact Gary at gary@casinocity.com and follow him on Twitter at @CasinoCityGT.

Gary Trask Websites:

twitter.com/#!/casinocityGT