Judge Rules in Favor of DraftKings, But Former Executive Can Work at Fanatics

Former DraftKings executive Michael Hermalyn is barred from using the company's information or soliciting DraftKings’ clients or employees. 

Feb 9, 2024 • 14:14 ET • 4 min read
Photo By - USA TODAY Sports

The former DraftKings executive accused of stealing company secrets from the sportsbook operator can work for new employer Fanatics Sportsbook but with some limitations for now, a federal judge ruled Thursday, according to Reuters

Michael Hermalyn, who DraftKings said in a lawsuit used an elaborate scheme to obtain a client list and broker a deal with a competitor five days before Super Bowl LVIII, is barred from using the company's information or soliciting DraftKings’ clients or employees. 

These are both temporary rulings from the U.S. District Judge Julia Kobick in Boston.  

"We are pleased that the judge granted a temporary restraining order in favor of DraftKings ordering Mr. Hermalyn not to solicit DraftKings employees or customers, and not to use any confidential company information," DraftKings said in a statement. 

Kobick determined that there was enough evidence supplied by DraftKings’ lawyers to show Hermalyn likely wrongly accessed the information, so a temporary restraining order was granted. 

The federal judge ordered depositions and discovery for an April 2 hearing that could keep the ruling in DraftKings’ favor if more facts are received.

Sue, counter-sue

Hermalyn sued DraftKings last week after taking off for Fanatics on Feb. 1 to get out of his non-compete clause. 

DraftKings countered by filing a lawsuit on Monday to keep a former senior vice president from taking their VIP customers.

The complaint alleges that he “timed his departure and theft of confidential information to coincide with the critical days leading up to the Super Bowl to further a scheme to irreparably interfere with DraftKings’ customer and business relationships by pursuing those relationships at Fanatics using the confidential information and goodwill that he obtained at DraftKings.”

Hermalyn once handled relationships with many high-level bettors and allegedly obtained Super Bowl information that included the names of celebrities and athletes as well. Still, DraftKings alleges he took “disloyal steps” when he met with Fanatics during last year’s Super Bowl. Then he hatched a year-long plan to access confidential information and recruit fellow employees to join Fanatics.

Getting ugly

DraftKings also accused Hermalyn of lying in a Jan. 29 email sent to colleagues about mourning the loss of a friend during a trip to Pennsylvania. The company claims he was in Los Angeles brokering a deal with Fanatics. 

Hermalyn accused DraftKings of using a smear campaign against him. 

“DraftKings — a large public company — has invoked its go-to playbook to trash (me) in a transparent attempt to ruin (me) professionally and personally,” his attorneys presented in a Wednesday motion to revoke DraftKings’ request. “I knew from past experience with DraftKings that they would likely come after me aggressively and malign me as they have done with others.”

Rivalry is born

These two sportsbooks are creating a rivalry in the courts, but they are both in different places as gaming companies.

Along with FanDuel, DraftKings is one of the top two market-share sportsbooks in the U.S. DraftKings, which operates in 24 states and Ontario, Canada, reported fourth-quarter 2023 revenue of $855 million. 

Fanatics Sportsbook is a relative newcomer to the market. The sports and memorabilia launched an online and retail sports betting division in 2021 and bought PointsBet’s U.S. holdings in 2023. Fanatics migrated its platform to Iowa earlier this week, giving it 12 U.S. markets. 

The sportsbook is also currently dealing with non-compliance issues in Massachusetts.

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