Opinion: FanDuel Case Shows Why Customer Lawsuits Face Such An Uphill Battle

Posted on March 16, 2021
FanDuel
Posted By on March 16, 2021

At the beginning of March 2021, an Illinois bettor named Andrew Melnick filed a lawsuit in federal court against FanDuel.

As reported by Legal Sports Report shortly after the filing became public, the plaintiff faces long odds in being successful in this claim.

This is hardly the first consumer lawsuit against a sportsbook or daily fantasy sports provider, and it certainly will not be the last. But consumers rarely win big, even when they win.

The Melnick case against FanDuel

The Melnick case is the latest in a series of complaints alleging that gambling providers, sports leagues, or third parties have somehow acted in a manner unfair to the consumer.

Melnick’s complaint, filed on behalf of himself and like-situated individuals, alleges that FanDuel engaged in “an unlawful pattern and practice of unfair and deceptive trade practices….”

Specifically, it is alleged that FanDuel’s purported real-time data was inaccurate and therefore customers were making wagers with incomplete information, effectively changing the odds of the event for the bettor.

The specifics

In February 2021, Melnick created a FanDuel Sportsbook account with $100. A few days later, Melnick placed some live wagers on the under of an NCAA men’s basketball game.

On March 1, 2021, Melnick documented that a one-minute change in real-time resulted in two minutes being added on the FanDuel app to the University of New Orleans vs. Incarnate Word game. The time, however, was not the only change, as the odds were adjusted as well.

The allegations against FanDuel

Melnick alleges that the purported real-time information being less than real-time contributed to him losing more than $50.

According to Melnick’s complaint, the time elapsed in:

men’s NCAA college basketball, is frequently materially understated on the real-time display on the FanDuel platform in a range of 5 to 35 percent less than the actual time remaining in the sporting event, making the Wagers on the “Under” during the game appear to be a far better bet than they otherwise actually are.

Melnick also alleges that the scores displayed on the FanDuel app are not always accurate when matched up with the time remaining in games.

Multi-state party

The plaintiff alleges that there are class members across the country listing these as potential subclasses if the lawsuit is granted a class action certification:

  • Illinois
  • New Jersey
  • Pennsylvania
  • West Virginia
  • Indiana
  • Iowa
  • Colorado
  • Tennessee
  • Virginia
  • Michigan

Melnick and his attorneys allege that FanDuel violated various state consumer protection statutes, as well as breaching a contract with customers and being unjustly enriched by allegedly misrepresenting the time remaining to consumers.

Not the first rodeo

A little more than a year ago, Kristopher Olson filed suit against DraftKings, as well as Major League Baseball alleging that as a result of the alleged cheating by the Boston Red Sox and Houston Astros can-banging, he and other DFS had missed out on a fair opportunity to compete on DraftKings.

Like Melnick, Olson sought a class-action certification for his claim that was filed in the Southern District of New York. Olson’s claims were quickly dismissed for failure to state a claim upon which relief could be granted.

The fact is, it is hard for consumers to recover against operators.

What success looks like?

Even the most salacious headlines, such as the dubbed “insider information” scandal involving employees at both FanDuel and DraftKings back in 2015, have not resulted in significant windfalls for aggrieved consumers.

DraftKings and the plaintiffs just this month entered into a proposed settlement that would see the payment of two separate settlement funds.

The first would consist of $7.28 million “DK Dollars” (yes, that is what they are called.) DK Dollars cannot be cashed out; they can only be used to enter contests. This would be available to class members with open accounts who complete and submit a claim form in a timely manner.

The second fund would consist of $720,000 and would be for class members who closed their DraftKings accounts and file a claim with documentation in a timely manner.

The amounts that any class member could receive appear to vary but both settlement funds would see payments capped at $1,050. The proposed Class Representatives would receive a payment of $1250, but these payments would be limited to the 35 representatives.

The settlement of the Multi-District Litigation will end up costing DraftKings slightly more than the settlement that was reached with the New York Attorney General.

If not court, then what?

The challenge for consumers who feel that they have been wronged by gaming operators is that the court system is generally a difficult landscape to navigate. Even in cases where the plaintiffs are successful against a company, the settlements often look like those resulting from the Multi-District Litigation.

Even when successful, there is a tremendous amount of time invested — more than five years in some cases — for very little reward, making it seem like a questionable use of resources. There is certainly some moral victory in fighting “the good fight.”

Arbitration

A big challenge for many plaintiffs is even getting into court, as most consumer agreements now contain binding arbitration clauses that severely restrict the ability of someone to get into court. Arbitration provisions are generally upheld by courts, as they have historically been viewed as a fast and cheap alternative to litigation. Historically, arbitration clauses have been viewed as a way to lessen the burden on the court system.

Amongst several problems with arbitration are that it is individualized and still far from cost-free. This means that when the amount of the dispute is relatively small (say a sports betting account with a balance of $100,) then the benefits of pressing a complaint often are beaten out by the costs.

Additionally, arbitration is generally not precedential and is often confidential, meaning that even when it occurs the public often does not know.

Gaming authority remedies

In many cases, this leaves consumers primarily turning to gaming regulatory authorities for remedies when they feel aggrieved by a gaming operator.

In what are still early days, we have seen gaming regulators remedy some consumer disputes. But,the newness of the legal sports betting industry outside of Nevada means that there is far from a great deal of precedent on how to resolve a wide variety of consumer disputes.

As time continues, we will likely see just what issues regulators are prepared to address and which pass on.

Closing the gap

As a relatively new industry in much of the country, the consumer protection infrastructure is still catching up.

In time, processes to file disputes will be streamlined, but at the moment there remains a great deal of inconsistency, leaving consumers with few desirable options if they believe they have been wronged.

At some point in the future, it is likely that systems will catch up, but until that happens consumers are often left taking long shots or taking no action at all.

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John Holden

John Holden J.D. / Ph.D. is an academic. His research focuses on policy issues surrounding sports corruption.

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