DraftKings to Fork Out $8m in DFS Lawsuit Settlement as FanDuel Case Remains Unresolved

  • Created in 2016, the multidistrict case involves dozens of suits against DraftKings and FanDuel
  • DraftKings will pay $7.28m in “DK dollars” and $720,000 to former customers in a DFS settlement
  • Plaintiffs allege the operators funded prizes for experienced players with new-player deposits
  • FanDuel’s portion of the case is still unresolved as the operator faces another suit filed this week
A judge's gavel next to a label reading Class Action
DraftKings has agreed to an $8m settlement for its part in a multidistrict lawsuit filed against the company and rival FanDuel in relation to DFS practices. [Image: Shutterstock.com]

A costly conclusion for DraftKings

US-based sports betting operator DraftKings has reached an agreement to settle its part of a multidistrict class action lawsuit centered around its daily fantasy sports (DFS) offering.

In 2016, the Judicial Panel of Multidistrict Litigation in Massachusetts consolidated dozens of consumer lawsuits filed against DraftKings and its market competitor FanDuel. DraftKings decided to settle its part of the case separately from FanDuel after arbitration in November 2019.

claims from approximately 3.15 million people

In the lawsuit, players accused DraftKings of misrepresenting the difficulty of its DFS contests and the terms of promotional offers. The multidistrict suit included claims from approximately 3.15 million people.

DraftKings proposed its settlement terms on Wednesday. The company will create two funds, one including $7.28m in “DK dollars,” site credits for its DFS platform, and one of $720,000 for plaintiffs who no longer have a DraftKings account. The latter will go to anyone with a net loss who made a first-time deposit before January 1, 2018.

Although DraftKings has agreed to a settlement, FanDuel still needs to resolve its part to the lawsuit.

Further details of the case

The plaintiffs accused both DraftKings and FanDuel of running illegal gambling enterprises through their DFS platforms. The plaintiffs claimed both operators used the deposits of new players to fund prize pools for more experienced, high-volume players.

The lawsuit alleged that the companies allowed employees with insider data to compete on each other’s sites. It also claimed that the operators intentionally misled players through their promotions, concealing restrictions on their terms and conditions for bonus offers and initial deposit matching.

Under the terms of DraftKings’ settlement, the operator will also pay $1.9m in attorney fees and reimburse $100,000 in expenses. In addition, the operator agreed to introduce a number of measures over the next two years to confront the issues raised within the lawsuit.

DraftKings agreed to limit players to one DFS account and prevent employees from entering public contests. It also said it would apply symbols to the usernames of all highly-experienced bettors to signify their rank. Additionally, the company will introduce more responsible gambling measures, such as links to resources for those seeking help for problem gambling.

FanDuel facing multiple suits

As of yet, FanDuel’s part in the multidistrict lawsuit still requires an agreement. It is not the only legal action the operator is currently facing, though. A FanDuel app user sued the operator in a federal court this Tuesday over claims of misleading and inaccurate data.

intentionally delayed its real-time scoring data

Plaintiff Andrew Melnick filed his class action complaint in Illinois. He alleges that the operator has intentionally delayed its real-time scoring data to coax players into placing wagers they have less chance of winning. Melnick argues the company has broken multiple customer protection laws in doing so.

In the complaint, Melnick provides his own example of a losing wager on an NCAA basketball game. The plaintiff placed an “under” bet on the game’s combined points, predicting that the total would be below a certain number. He claims, however, that the time and the score of the game were sometimes inaccurate.

Melnick is seeking damages and has requested an order stopping FanDuel from operating until it improves the accuracy of its data.