DraftKings Settles DFS Class Action Suit with Angry Players for Site Credits

Posted on: March 7, 2021, 11:45h. 

Last updated on: March 8, 2021, 11:28h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

DraftKings will pay $8 million to class action plaintiffs that asserted the company didn’t accurately represent the difficulty of its daily fantasy sports (DFS) contests, among other claims. The settlement was reached last week.

DraftKings suit
US District Court in Boston. DraftKings settled a class action suit there last week. (Image: Boston Globe)

However, there’s a big sticking point. The bulk of the $8 million being directed to the aggrieved parties — $7.28 million to be precise — won’t be delivered in cash. Rather, it will be allocated in the form of “DK Dollars” — the equivalent of credits on the very web site the plaintiffs groused about. The settlement was reached in the US District Court for the District of Massachusetts. DraftKings is based in Boston.

The settlement provides significant injunctive relief by effectuating changes to DraftKings’ online platform, and also provides valuable monetary relief in the form of ‘DK Dollars’ or US dollars to settlement class members who made a first-time deposit into their daily fantasy accounts prior to Jan. 1, 2018 and who are not net lifetime winners on DraftKings,” according to the court document.

As part of the pact, the gaming company is creating two settlement funds. One is for the aforementioned $7.28 million to be credited to DraftKings players as part of the class action. The second fund will direct $720,000 in cash to former clients whose accounts are closed.

Under the terms of the settlement, the DFS giant won’t fight a $1.9 million class counsel fee, nor will the company oppose $100,000 in plaintiffs’ expenses.

History of DraftKings Legal Tiff

Last week’s settlement stems from multiple suits filed by plaintiffs against DraftKings and rival FanDuel that were combined and transferred to federal court in Massachusetts in February 2016.

In addition to claiming the two largest DFS providers misrepresented the difficulty of the games offered, plaintiffs assert the companies falsely advertised deposit matching bonuses, while intentionally concealing related fine print. They also claim DraftKings and FanDuel employees leveraged insider data to compete against clients in DFS contests.

Following a related scandal, both companies in October 2015 barred staffers from participating in DFS contests offered by the employers. That after a DraftKings worker confessed to prematurely releasing lineup data. The same employee won $350,000 in a FanDuel competition.

While DraftKings and FanDuel maintain dominant share in the domestic DFS market, dissatisfaction among casual players has grown over the years, leading to widely held beliefs that it’s almost impossible for ordinary participants to compete against “sharks” — DFS participants that play for a living with the means and acumen to build sophisticated computer programs to aide their quest for dominance.

The discontent led other companies with different DFS offerings into the market, and several of those firms drew the eyes of traditional gaming operators looking to join the daily fantasy party.

More Settlement Details

The class action involves 3.15 million people and the claims against FanDuel are still unresolved.

DraftKings acknowledge no culpability. Rather, it noted it has “substantial and meritorious” answers to the claims. But the company also said it’s “desirable to settle the litigation.”

A related settlement web site will be constructed and DraftKings will notify affected by parties by email, according to the court document.