A federal judge has decided to dismiss several claims in a class action lawsuit against DraftKings, but not without leaving the door open to a possible injunction that could ultimately prevent the company from offering paid daily fantasy sports contests in California, US.
In his ruling issued on July 29, US District Judge Charles Breyer threw out claims seeking to recover gambling losses, relying his decision on the state’s longstanding public policy that generally stops courts from enforcing gambling debts.
“The public policy against gambling loss recovery bars plaintiffs’ claims to the extent they seek recovery of their losses in any form, whether it is damages or restitution,” Breyer wrote.
DraftKings Misrepresented Their Contests, Players Claim
The lawsuit was brought by two DraftKings users, Zhicheng Zhen and Jonathan Smith, who allege the company did not properly present the legality of its daily fantasy sports contests in California.
The two plaintiffs claim they participated in the contests after relying on DraftKings’ representations that the games were deemed lawful in the state.
The judge dismissed their claims related to monetary recovery, but allowed portions of the case to proceed under California’s Unfair Competition Law and Consumer Legal Remedies Act.
More exactly, Breyer determined that the plaintiffs had sufficiently alleged economic injury and could seek public injunctive relief. The latter is a court order that prevents unlawful acts threatening future harm to the general public, but does not award damages.
However, the injunction could potentially require DraftKings to stop offering paid fantasy contests in California if the court ultimately determines they violate state law.
“This Case Is About a Class of Losers”
Breyer described California’s legal landscape surrounding daily fantasy sports as “murky.”
He also referred to California Attorney General Rob Bonta’s nonbinding opinion last year concluding that daily fantasy sports contests involving players physically located in the state are prohibited under California law and should be banned, something that Bonta was planning to do, sources close to the California television channel KCRA said.
However, no California court has definitively ruled on the issue, and state authorities have not taken enforcement action.
Breyer also allowed allegations tied to fraud to move forward, finding that the plaintiffs adequately claimed they relied on DraftKings’ statements regarding the legality of its products.
The judge went on to emphasize DraftKings’ support for a 2022 ballot initiative seeking to legalize online sports betting in California as proof that the company may have understood the legal uncertainty surrounding its operations.
“In a technical sense, this case is about a class of losers,” Breyer wrote in the opening of his order. “In a legal sense, this case is about games that were prohibited by the California Penal Code,” he added.