A class action lawsuit that includes seven claims against FanDuel and DraftKings has been filed in a Manhattan federal court on Thursday.
The U.S. District Court for the Southern District of New York filing, “Johnson v. Fanduel, Inc. et al,” lists the plaintiff as Adam Johnson of Kentucky, who says he deposited money into a DraftKings account.
The recent revelation by both companies that their employees were allowed to participate in contests on each others sites for the same cash prizes available to the general population is the origin of the majority of the case. Included in the seven claims against the two companies are negligence, fraud and misrepresentation and Violation of Kentucky Consumer Protection Act among others.
The suit alleges “”DraftKings performs analytics to determine winning strategies, return on investment of certain strategies and even how lineups on FanDuel would do if they were entered into DraftKings contests.” Key strategies from those analytics potentially available to some employees could possibly give an unfair advantage to an employee playing on a competitor’s site. It states that “The biggest edge any player can have come from having data and information. DraftKings and FanDuel employees have access to both things, neither of which is available to the public.”
According to ESPN.com, earlier in the week they were told by FanDuel spokesperson Justine Sacco that of all of the money awarded by FanDuel since its inception DraftKings employees have won 0.3 percent of the total, or around $6 million of the approximate $2 billion awarded up to this point. Entry fee totals payed by those employees are unknown. In a conference at Babson College last month, DraftKings co-founder Paul Liberman said that the salaries of some of the company’s employees were less than what they have won from other fantasy sites.
The class action suit that names both FanDuel and DraftKings as defendants specifies the proposed classes and or subclasses as, “All persons in the United States who deposited money into a DraftKings account before Oct. 6, 2015 and competed in any contest where other entries were made by employees from DraftKings, FanDuel or any other DFS site.”
This week both FanDuel and DraftKings banned their employees from future participation in competitions on any daily fantasy site, including theirs. The two have also hired law firms so that the companies’ internal controls against fraud can be reviewed. The move came after both companies came under scrutiny this week when an employee of DraftKings inadvertently released sensitive in-house data and collected $350,000 in a second place win on FanDuel’s million-dollar fantasy contest likening it to insider trading. Both companies said that no information has been found to indicate that any employee had access to information specifically giving them an unfair advantage in a contest.
In what might be considered as good news, criminal inquiries into Boston based DraftKings Inc., won’t be pursued by Massachusetts Attorney General Maura Healey who said that that no federal or state law prohibit DFS sites from operating in the state.