Two class action lawsuits in California are challenging the legality of not just pick’em fantasy but fantasy contests featuring more traditional lineups as well.
Two groups have filed class action lawsuits against DraftKings and PrizePicks in the Northern District of California. The firm representing the plaintiffs in both cases is Almeida Law Group, which specializes in corporate class action cases.
Suits attack multiple types of fantasy sports
The DraftKings lawsuit takes aim not just at its Pick6 product, which mimics the peer-to-peer pick’em offerings of Underdog and PrizePicks, but also the slate-style contests that originally brought DraftKings fantasy to prominence ten years ago. The lawsuits argue all these forms of fantasy run afoul of the law, particularly because of the variable payouts that come with lineup-based fantasy contests.
The class covered in the lawsuits includes all California residents who placed a “bet” or “wager” with DraftKings while in the Golden State. According to the complaint, the class could include “thousands or potentially millions of members.”
California is estimated to be the largest DFS market in America.
According to data provided by the California Business Journal, the unregulated DFS platforms in the state accept approximately $200 million in entry fees annually.
DraftKings’ pooling system in question
The plaintiffs argue that Pick6’s prize pool violates state law through its pool model as California Penal Code prohibits “pool selling or bookmaking, without or without writing, at any time or place.” According to case law, the California Court of Appeal considers pool selling “the selling or distribution of shares or chances in a wagering pool.” The penal code also prohibits “receiving, holding or forwarding” any money that is staked or wagered.
“Put simply, a company violates California Penal Code Section 337a when it engages in pool selling, bookmaking, or accepts or records any bets or wagers on the result of any contest and/or any unknown or contingent event whatsoever—including, without limitation, bets associated with the performance of persons, such as in fantasy sports,” reads the complaint.
The complaint also takes issue with DraftKings advertising its DFS and Pick6 offerings as legal in the state. The complaint points to a DraftKings ad that includes a bag of Ruffles potato chips providing evidence that the company spends millions to advertise in California.
DraftKings pick’em style game under scrutiny
DraftKings debuted its Pick6 offering in December 2023 providing its customers with the ability to enter prop-style contests against other users instead of the house.
Pick6 allows users to construct rosters of up to six players and pick whether or not those players meet exceed or fall short of certain statistical categories. The offering allows up to 150 entries in each contest with a prize pool that awards payouts based on how many legs players select correctly. If multiple players pick the same accurate legs, the prize playout is split between those players. DraftKings is currently operating Pick6 in more than 15 states.
The offering is not live in several key regulated gaming markets including, Nevada, New York, Florida and Pennsylvania. In December 2023, Maryland regulators ordered DraftKings to shutter Pick6 in the state after it was included in the operator’s initial six-state rollout. Maryland regulators concluded that Pick6 violates state gaming regulations.
PrizePicks and Underdog have undergone similar scrutiny for their against-the-house pick’em products. After exiting several markets, they have returned with a peer-to-peer version of the offering.
Long-awaited AG opinion on DFS imminent
According to KCRA 3, California Attorney General Rob Bonta’s office is expected to release an opinion on the legality of fantasy sports in the state. The opinion, which will be issued by July 3, is expected to conclude that fantasy sports are in violation of state law.
Industry insiders anticipate the opinion will take a far-reaching stance on the vertical that includes all forms of fantasy, which would bode well for these class actions.
