Arbitration and the Case against Fantasy Sports Websites
Friday, October, 23, 2015
A new class action suit filed against fantasy sports sites DraftKings.com and FanDuel.com claim the only winners are a small group of fantasy experts. The remainder of people playing daily on these sites (approximately 90%) are propping up the winner’s pot with their entry fees and stand no chance of ever winning.
There are also allegations the sites’ employees were using inside data to play and win on other sites. Employees have always been banned from betting at their own sites and are now restricted from doing so at competitor’s sites. Prior to the new rule, DraftKings employees had won $6 million from FanDuel, and there are reports employees earned more with their competitor site bets than they did in salary from their employer.
The class action suit claims bettors would not have gambled their money had they known insiders were using inside data to make bets – data not available to regular players. The suit claims fraud, negligence, conspiracy, and violation of consumer protection laws in Kentucky and New York.
The question now is whether the allegations will be settled in the courtroom or through individual arbitration, as per terms in the user agreements. Both sites have mandatory arbitration clauses in their terms, but the lawsuit claims they are not valid because the promises made by the sites are illusory and there is not adequate notice of the arbitration clause. Case law regarding mandatory arbitration clauses in online user agreements and terms of service are still developing, though courts are reluctant to allow much leeway when it comes to these clauses.