FanDuel Secures An Important Victory In Daily Fantasy Sports Lawsuit, However Plaintiff Plans To AppealMarc Edelman in Forbes, October 09, 2013
Earlier today, the daily fantasy sports website FanDuel secured an important legal victory when a federal district court based in Illinois dismissed a lawsuit seeking to disgorge the website’s operating profits and strip away one of its contestants’ winnings based on the Illinois Loss Recovery Act – a ‘qui tam’ statute that allows third parties to recover others’ unclaimed gambling losses.
The plaintiff in the now-dismissed case, Christopher Langone, had argued that the money made from FanDuel’s daily fantasy sports contests fell within the scope of the Illinois Loss Recovery Act because FanDuel’s daily fantasy sports contests were illegal games of chance — an issue that had never been addressed by any court within the context of daily fantasy sports.
Although the Langone court skirted the important issue of whether daily fantasy sports contests are legal games of skill or illegal games of chance, it nevertheless dismissed the case on a number of other grounds. Among them, the court found that Langone “failed to make even a bare assertion that he could recover more than $75,000″ — the minimum threshold needed for subject matter jurisdiction in federal court.
In addition, the court also rejected Langone’s claims against FanDuel because it concluded that FanDuel was not a gambling “winner” based on the Illinois Loss Recovery Act, but rather a mere operator of an online gaming site. This part of the ruling was largely expected in light of a similar ruling from a district court in New Jersey from 2007 that found that CBS was not a gambling winner in its operation of full-season fantasy sports contests.
Langone’s lawyer, Mark Lavery, has indicated by email that he plans to continue pursuing this matter, and he will likely appeal the ruling to the U.S. Court of Appeals for the Seventh Circuit.
Meanwhile, another daily fantasy sports lawsuit filed by Langone against a winner of a daily fantasy sports game hosted by DraftDay remains ongoing in an Illinois state court. Because DraftDay requires all of its contestants to adopt an Illinois choice of law clause and there is no need in state court to plead a claim of $75,000 or more, this second matter may present a better chance of victory for Langone.
Both today’s ruling and its anticipated appeal will be watched carefully by Comcast (a recent equity investor in FanDuel), as well as large fantasy sports businesses such as ESPN, CBS and Yahoo. It will also receive a careful eye from the many startup businesses involved in the daily fantasy sports marketplace.