Although the UFC and Draft Kings have yet to formally announce an exclusive sponsorship deal in which the fantasy sports operator will become the company’s official sponsor, the two organizations have something in common: people filing class action lawsuits against them.
As The Legal Blitz brought to light in his ATL Redline post, the Boston-based DraftKings is being sued in federal court in Florida claiming that DraftKings violated the Florida Deceptive and Unfair Trade Practices Act.
Essentially, the lawsuit claims that Draft Kings misrepresented the term “free” in its advertisements in order to induce consumers to deposit money to the website. Commercials and ads which indicate “free sign-up bonuses” that match up to 100 percent of deposits for the site are untrue according to the complaint. As described in the complaint, customers must enter fantasy contests and receive bonuses “in incredibly small increments” and rather than the 100 percent deposit match, they receive just 4 percent of every dollar they play.
In this case, the named plaintiff deposited $25 and only received $1 in return when he played in the fantasy contests. It’s likely that if this case gains momentum, there will be lawsuits all over the country simulating this according to The Legal Blitz.
But, as he points out fantasy sports players registering with DraftKings probably did not know that they agreed to mandatory arbitration. He points out a 2013 U.S. Supreme Court case which dictates that arbitration provisions are binding and enforceable.
While this may not be the ultimate result in litigation, it’s probably a likely outcome.
Payout Perspective:
It’s always advisable to have arbitration agreements in contracts to reduce the potential of litigation as well as control the potential legal costs. Many things that people sign have these types of clauses. The way the clause is drafted is the ultimate issue on whether it may be enforced. The class action lawsuit filed here is an interesting take on the fantasy sports “gaming” industry and how closely it resembles actual gambling. Obviously, the enticements about “free” are stretched and while many consumers were likely duped into thinking that they’d be getting an incentive for playing, they will probably “let it go” in order to play. Unfortunately, Zuffa probably does not have as easy a road to resolving its class action lawsuit.
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