Dispute heading for Federal court
FanDuel facing law suit as ‘insider trading’ row escalates
A Kentucky man has filed a class-action lawsuit against FanDuel and its US rival DraftKings which run the two biggest websites in the fast-expanding daily fantasy games industry.
It was alleged this week that a DraftKings employee who had access to internal information won $350,000 in a daily fantasy game on FanDuel.
As reported by Daily Business, social media sites have been swamped with angry users comparing the scandal to Wall St style “insider trading”.
Draftkings said the allegation was incorrect and both companies insist they have done nothing wrong, but both have banned their employees from participating in games and have also hired outside counsel to review their internal controls and practices.
The suit, according to sources in the US, alleges that the two firms violated fraud, negligence and consumer protection laws by allowing employees to access certain information while also participating in daily fantasy contests.
The controversy is spreading across the games halls of America where participants play for big bucks.
Already there are demands for a congressional inquiry into whether fantasy games breach US laws banning online gambling, an issue which has prompted at least one television station to stop taking FanDuel’s advertising. This latest development could turn into a major legal dispute.
The suit, filed in the U.S. District Court for the Southern District of New York, seeks damages determined in a jury trial. In addition to alleging fraud and negligence, it claims DraftKings, which operates out of New York City, and FanDuel violated New York false advertising and deceptive practices laws and Kentucky consumer protection laws.
The plaintiff, Adam Johnson of Louisville, Kentucky, deposited “at least $100” into a DraftKings account, according to the suit. The complaint states that he would not have participated in the contests had he known that each of the companies was allowing its employees to participate in daily fantasy games on the other’s website.
The suit goes on to say that daily fantasy users “were fraudulently induced into placing money onto DraftKings because it was supposed to be a fair game of skill without the potential for insiders to use non-public information to compete against them.”