DraftKings faces allegations of illegal sports betting via prediction markets in a new class-action lawsuit filed in federal court in California, at the same time as it is ramping up its advertising in the biggest states where online sports wagering is not legal.
The class-action suit, filed in the U.S. District Court for the Central District of California on Aug. 13, seeks injunctive relief and financial damages for plaintiff Ricardo Andrio and other Californians represented in the suit.
“After years of refraining from operating in these states, DraftKings has now sought to evade and circumvent state laws that bar its sportsbook operations,” reads the complaint, adding that it offers a sports betting equivalent in jurisdictions where unlicensed sports
betting “is categorically illegal.”
“DraftKings deceives consumers by marketing Predictions as a legitimate ‘prediction market’ rather than a sports betting product, designing the platform to mimic a sportsbook while describing the activity as ‘trading’, failing to implement responsible-gaming safeguards, permitting users as young as (18) to trade, and shifting all legal risk onto consumers through its Terms of Use, even while acknowledging active litigation and regulatory uncertainty surrounding event-contract legality.”
Suit alleges DraftKings misleading Californians
Andrio seeks to represent California residents who bought sports event contracts through DraftKings Predictions and lost money. The suit claims that they would not have placed those wagers had they known the company was allegedly misleading consumers about the product, stating that the plaintiffs were not informed that “Predictions functioned as an unlicensed sportsbook.”
The lawsuit accuses the operator of leveraging its reputation and prominence as a licensed sportsbook to promote Predictions. It also argues that changing the terminology around sports betting and sports trading does not change the fact that consumers are wagering money on the outcome of sporting events, something the filing reiterates is illegal in California.
“DraftKings markets these sports prediction product[s] as ‘event contracts’ or ‘trading,’ rather than sports betting, thereby creating the misleading impression that the product[s] are materially different from, and more lawful than, traditional wagers,” added counsel for the plaintiffs. “DraftKings leverages its reputation as a licensed sportsbook by promoting Predictions to the same customer base and through the same platform, despite offering an unlicensed product that is, in substance, indistinguishable from sports betting.”
Alleging violations of the state’s Unfair Competition Law and False Advertising Law, the suit aims not only to block DraftKings from offering Predictions in California, but also to recover the amounts that the plaintiffs spent on the platform. The complaint suggests aggregate claims could exceed $5m.
SBC Americas reached out to DraftKings for comment, but had not heard back as of the time of writing.
The company has faced class-action lawsuits alleging illegal gambling in California before. Last month, a federal judge said a separate lawsuit focused on DraftKings’ daily fantasy sports offerings can move forward.
DraftKings has offered sports in California since December
DraftKings first launched its Predictions product in December 2025. California was one of the first wave of states in which the gaming giant launched sports event contracts.
That launch came just a few weeks after the company debuted its Spanish-language functionality last November. On an earnings call that month, CEO Jason Robins cited California, as well as Texas, as a core market that DraftKings hoped to appeal to with its Spanish version.
“It’s obviously a very fast-growing demographic in the United States, and some of the biggest states where those Spanish-speaking folks live haven’t even come online yet, like Texas and California,” he said at the time. “So, you know, there’s much more incremental opportunity in the future as well.”
Since then, DraftKings has jumped into sports prediction markets and has rolled out a new all-in-one app that places event contracts in the same app as its state-regulated gambling products, with availability of each product depending on the location of the end user.
Company steps up Predictions marketing
In recent weeks, DraftKings intensified its marketing in California, as well as other jurisdictions that do not allow sports betting.
This week, prediction market research firm Aldrin Research noted that DraftKings recently launched state-specific adverts in four of the biggest states where it cannot legally offer state-regulated online sports wagering:
- California
- Florida
- Georgia
- Texas
The ads include sports betting-style welcome offers, such as $200 in bonus trades after a first-time user deposits $5.
A DraftKings post in late June confirmed that Predictions has been extended nationwide, with the language focused largely on its availability in California.
Robins referenced his company’s cross-country marketing efforts on the company’s most recent earnings call this month, noting that the company’s partnerships with major firms like NBCUniversal have the advantage of facing all states, regardless of which of its products are available there.
“I do believe there’s an education period that needs to occur for people to understand that, actually, if you are in California or Texas, you can use DraftKings now,” Robins said earlier in August. “That’s something we started to do in the World Cup, and I think it will really become apparent in the NFL season. When you start to see that broader awareness really take hold, that’s when you’re going to see much, much faster customer acquisition come in.”
