California Attorney General Rob Bonta has weeks before handing down a legal opinion that will change the status of daily fantasy sports (DFS) in the state. Insider reports submitted to KCRA 3 show that the opinion will declare DFS portals like DraftKings and FanDuel as illegal gaming operations under California law.
Key Takeaways
- California AG may soon declare daily fantasy sports illegal gambling under existing state law.
- DraftKings faces class action lawsuit alleging deceptive, illegal DFS operations in non-legalized states.
- Federal judge orders Stake.us gambling case to proceed through private arbitration, not courtroom trial.
While Bonta's office has not made an official announcement, the effect is already being felt across the industry. The Coalition for Fantasy Sports cautioned that doing so would erase an activity that has been increasingly popular with Californians for many years.
Online sports betting in California is already prohibited, while DFS is in regulatory limbo, coming under increasing scrutiny from legislators and tribal regulators.
DFS tournaments usually involve individuals paying fees to build virtual teams of professional players, and cash prizes are paid out depending on real-life performance statistics. The critics claim that this format involves an element of chance in defiance of California's gambling law.
Indian tribes, such as the Tribal Alliance of Sovereign Indian Nations and the California Nations Indian Gaming Association (CNIGA), have requested that lawmakers hold proposed legislation on DFS until Bonta's opinion is released.
CNIGA chairman James Siva described the anticipated action as a means of preventing illegal gaming and safeguarding consumers.
DraftKings faces suit over alleged illegal DFS operations
A new class action complaint against DraftKings was filed in California on June 1. The plaintiffs claim that the company runs illegal gambling games that masquerade as DFS. They say DraftKings deceives California residents into playing illegal gaming.
While DraftKings is legal in states that openly legalized online sports betting, California is not one of them. Nevertheless, the company has continued operating DFS contests there.
The plaintiffs are hoping to be certified for class action status to encompass affected users statewide.
Their lawsuit complicates an ever-growing docket of litigation nationwide alleging that leading gaming platforms are taking advantage of gamblers with a weakness for addiction. Pennsylvania bettors have also sued DraftKings in May after they claimed the sportsbook was taking advantage of their gambling addiction.
Federal court sends Stake.us lawsuit to arbitration
DFS is not the only gambling segment being pursued in California. A federal judge has decreed that a lawsuit against the sweepstakes gaming site Stake.us must be decided through arbitration, not litigation.
The ruling came after a California man, Dennis Boyle, sued Sweepsteaks Limited, the owner of Stake.us, alleging that it operates an illegal gambling site.
The case, which started in state court in February and was transferred to federal court, where U.S. Central District Judge James Selna issued the order compelling arbitration. Sweepsteaks asserted that Boyle had agreed to the site's terms and conditions, which had a binding arbitration provision.
Although the arbitration terms included an opt-out provision, the court held that Boyle had not opted out. Therefore, the arbitration clause is still enforceable, and the case cannot be tried by a jury or judge.
