Editor’s Note: On Feb. 22, the US Court of Appeals for the Seventh Circuit — a court one level below the Supreme Court — will hold a hearing in a lawsuit filed by three ex-college football players against DraftKings and FanDuel.
In a three-part series, Legal Sports Report probes the case and explains its potential implications for both daily fantasy sports and traditional sports betting. This first installment unpacks the ongoing legal dispute involving rights of publicity claims and First Amendment free speech concerns.
A group of college football athletes claim that DraftKings and FanDuel run afoul of Indiana’s right of publicity law and cannot use player names and related game statistics in DFS contests without permission.
DraftKings and FanDuel reply that such names and stats are freely available for use given their newsworthiness and status as a topic of public interest. The DFS companies also cite the First Amendment in their defense.
On Feb. 22, a federal appellate court based in Chicago will hear arguments in the long-percolating legal case between the two sides. After the hearing, the three-judge panel will be tasked with issuing a ruling that could have implications for DFS and traditional sports betting alike.
Court documents obtained by Legal Sports Report help re-cap the case to date.
Lower court decision in favor of DFS operators
The case was initiated in Indiana federal court by Akeem Daniels, Cameron Stingily (pictured) and Nicholas Stoner, all former college football players. The two leading DFS operators — DraftKings and FanDuel — were named as defendants in the lawsuit.
On Sept. 29, 2017, Indiana federal judge Tanya Walton Pratt partially granted the motion to dismiss requested by DraftKings and FanDuel.
Judge Pratt found that both DFS companies were exempt from Indiana’s right of publicity law on two counts — the “newsworthy” exception and the “public interest” exception.
“[T]he materials challenged by Plaintiffs fall within the ‘newsworthiness’ exception to Indiana’s right-of-publicity statute,” wrote Judge Pratt in her 25-page decision. “[T]he prohibition of using an individual’s right of publicity without his consent does not apply to Defendants’ conduct.”
Judge Pratt ruled the same way in favor of DraftKings and FanDuel as to whether the “public interest” exception should apply.
“[T]he court concludes that Defendants’ materials constitute ‘reporting’ ” wrote Judge Pratt.
Judge Pratt concluded her written decision with a brief discussion of the First Amendment argument furthered by DraftKings and FanDuel, but reasoned that she did not “have the proper factual and evidentiary basis to conduct such an analysis.”
Daniels and his other co-plaintiffs appealed the loss to the Seventh Circuit, which is holding the upcoming hearing in the case.
Both sides have spent the past several months filing additional briefs in the case, refining the arguments previously made before Judge Pratt.
College athletes’ arguments on appeal
In their November 2017 opening brief, Daniels, Stingily and Stoner devoted the most time to a recurring theme that may be their central argument at the upcoming hearing.
“The District Court wrongly held that the Indiana statutory exceptions apply to illegal conduct,” wrote lawyers for the college athletes. “Where the speech at issue is integral to criminal conduct, there are no defenses grounded in the First Amendment.
“Defendants’ speech was integral to the illegality of their gambling contests.”
To support their argument, the college athletes pointed to a 1993 Supreme Court case.
“[T]he activity underlying the relevant advertising — gambling — implicates no constitutionally protected right,” concluded the Supreme Court in United States vs. Edge Broadcasting 25 years ago.
In an additional filing late last month, Daniels and the other plaintiffs reiterated their argument that DraftKings and FanDuel’s “speech” pertained to illegal conduct undeserving of First Amendment protection.
DraftKings and FanDuel respond
On Jan. 16, DraftKings and FanDuel filed a 53-page brief in support of Judge Pratt’s decision to dismiss the college athletes’ lawsuit.
“The District Court ruled correctly that [plaintiffs’] claims are barred,” wrote lawyers for DraftKings and FanDuel. “[F]antasy sports…is itself newsworthy.
“For the same reasons that college athletics and fantasy sports are newsworthy, they also constitute ‘topic[s] of general or public interest.’”
The two DFS companies also refuted each of the plaintiffs’ arguments about the alleged illegality of fantasy sports in Indiana and the non-applicability of the First Amendment.
“[Plaintiffs’] baseless contention that fantasy sports are illegal is irrelevant to a right of publicity claim,” wrote lawyers for DraftKings and FanDuel.
An intervening event
During the early stages of the lawsuit, a wrinkle was added to the case: Indiana enacted a new law to regulate DFS.
Both sides proceeded to position the intervening event differently.
“On March 24, 2016, the Legislature enacted a comprehensive statutory scheme regulating the licensure and operation of paid fantasy sports games,” wrote lawyers for FanDuel in a 2016 court filing. “In so doing, the Legislature declared that ‘[a] paid fantasy sports game conducted under this chapter does not constitute gambling for any purpose.’”
DraftKings made a closely related argument.
“[T]he new provisions codify the fact that fantasy sports contests were never illegal under Indiana law,” wrote DraftKings’ attorneys in a different 2016 brief.
Lawyers for Daniels and the other college athletes have flagged the new law repeatedly as evidence in support of their illegality-related claim.
“Defendants’ college sports gambling contests at issue in this litigation spanned from May 4, 2014 until March 31, 2016,” wrote the college athletes’ attorneys in a November 14, 2017 legal brief. “[T]he partial legalization did not encompass college sports, as to which daily fantasy contests remained illegal.”
Judge Pratt issued her ruling without settling the debate, but the underlying issue may crop up again during oral arguments next week.
After the Feb. 22 hearing, the three judges on the Seventh Circuit panel will issue a decision in the case. A 3-0 vote will result in a unanimous decision. A 2-1 vote will probably lead the lone dissenter to issue a separate decision.
Appellate court decisions can sometimes be released within weeks, but a three- to six-month wait time would be the most likely window for a ruling.
Regardless of how — or when — the Seventh Circuit rules, it is unlikely that the case will have any impact on the pending New Jersey sports betting case in the Supreme Court set to be decided sometime between March and June.
However, with Major League Baseball owning equity in DraftKings and the NBA having an ownership stake in FanDuel, such business dynamics could provide a twist in broader issues of sports betting legalization.
Indeed, both sports leagues are now actively lobbying for or against sports wagering bills in multiple states, while the two DFS companies are simultaneously making legal arguments in the ongoing court case that may run counter to the specific lobbying points being made by their part-owners.