DraftKings, FanDuel Legal Problems Persist On Numerous Fronts
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Illinois AG Madigan Files Motions To Dismiss Daily Fantasy Sports Lawsuits

Illinois daily fantasy sports case
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Illinois Attorney General Lisa Madigan responded on Friday to lawsuits by FanDuel and DraftKings with motions to dismiss their complaints. In December, Madigan issued an opinion that the two daily fantasy sports operators are conducting illegal gambling under state law.

Attorney Daniel Wallach was the first to report the news on Twitter.

You can read the filings in the FanDuel case here (memo of support) and here (motion to dismiss); for DraftKings here (memo and MTD).

What the AG filings say

Madigan’s office asserts that there is no grounds for DraftKings and FanDuel to sue on this matter. Both MTDs and memos in support are constructed similarly.

The motions to dismiss

Why does the AG believe that the lawsuits against her office should be dismissed? From the FanDuel MTD:

Plaintiffs’ claim is at the outset barred by sovereign immunity because the Attorney General was acting on behalf of the State, and her advisory Opinion was well within her constitutional and statutory powers and did not violate any law.

And then:

Second, Plaintiffs do not allege an actual controversy ripe for judicial determination. The Attorney General did not order Plaintiffs to cease operations and has not pursued or threatened Plaintiffs with criminal or civil litigation. Moreover, Plaintiffs have not alleged facts demonstrating the concrete hardship necessary to convert their disagreement with the Attorney General’s Opinion into a ripe justiciable controversy.

Madigan also argues that what she did, in her role as AG, is not an actionable matter of law:

The majority of state courts around the country have held that attorney general opinions do not raise a justiciable controversy.

As stated in the memos of support, Madigan was simply responding to a request for an opinion on the legality of DFS from the legislature, which is considering legislation.

Wait, didn’t the AG ask FanDuel and DraftKings to leave Illinois?

When Madigan issued her opinion, she put this on a cover letter to both DraftKings and FanDuel along with the opinion:

In light of the opinion, we expect that both FanDuel and DraftKings will amend their Terms of Use to include Illinois as an additional state whose residents are not eligible to participate in contests unless and until the Illinois General Assembly passes legislation specifically exempting daily fantasy sports contests from subsection 28-1(a) of the Illinois Criminal Code of 2012.

DraftKings and FanDuel — and many observers — likely took that as an assertion that they must stop doing business in the state. But Madigan’s office concludes differently, according to the memo of support for the MTD:

Plaintiffs’ conclusory assertion that the Attorney General “selectively request[ed] that FanDuel (as well as one other competitor, but no others) suspend operations” fares no better. The Attorney General never made such a request, rather, the Attorney General sent FanDuel the advisory Opinion along with a cover letter stating that the Attorney General Fanduel, Inc. v. Lisa Madigan expected FanDuel to follow the law.

Elementary statements informing a party of an expectation they will comply with Illinois law do not render FanDuel’s dispute ripe regarding the Attorney General’s advisory Opinion, especially on a criminal law that she does not enforce.

No harm from AG opinion?

Madigan’s memo highlights that there is no harm that occurs from her issuing an opinion on DFS:

As discussed above, Plaintiffs do not allege any fear of criminal prosecution. Further, Plaintiffs do not assert any present pecuniary harm ― nor could they, given they filed suit less than 24 hours after the Attorney General issued the opinion. Instead, Plaintiffs merely allege that the Opinion “threatens to harm FanDuel’s and Head2Head’s Illinois operations” by “discouraging consumers . . . discouraging vendors . . . and interfering with the sponsorship contracts FanDuel has with Illinois businesses….” Such statements are conclusory, and speculative at best.

Where did Head2Head Sports come from?

Madigan also questioned why a business other than FanDuel or DraftKings is suing them:

Oddly, FanDuel is joined by plaintiff Head2Head Sports, LLC, an entity that was not referenced in the Opinion and that does not operate daily fantasy sports contests.

And later:

The Attorney General’s advisory Opinion did not order specific conduct, adjudicate FanDuel’s rights or obligations, or threaten legal liability. The Opinion certainly did not do so for Head2Head.

The backstory of Illinois and DFS

Illinois has been one of several epicenters for the daily fantasy sports industry, both legally and legislatively:

  • Madigan issued her opinion on the legality of DFS in December, declaring that contests ran afoul of state gambling law and asking the top two DFS operators to add Illinois to a list of excluded states in their terms of use.
  • The next day — Christmas Eve — FanDuel and DraftKings filed suit in separate Illinois courts to have the courts rule that DFS is indeed legal in the state.
  • After that, Madigan and the DFS operators agreed to “expedited” schedules, and Friday was the deadline for her office’s response to the lawsuits.
  • Rep. Michael Zalewski was the first to take a real stab at regulating DFS via legislation. His bill was introduced in October, but no action has been taken so far.

Here is a look at the legal arguments on both sides regarding DFS vis a vis state law.

Other AG’s and DFS

Illinois is just one of several AGs who have questioned the legality of DFS:

  • Texas: This week, AG Ken Paxton issued an opinion saying that the courts would likely find that DFS is illegal gambling under state law. It’s not clear what action he will take, if any.
  • Vermont: The AG’s office in the New England state declared DFS is illegal gambling under state law. There has been no sense of what, if any, action the Vermont AG might take.
  • New York: FanDuel and DraftKings recently won a stay of a preliminary injunction in their ongoing court battle with New York Attorney General Eric Schneiderman.
  • Nevada: An opinion from the office of AG Adam Laxalt in October came to the conclusion that DFS was gambling under state law and required a license to operate.

There continues to be speculation of what California’s attorney general, Kamala Harris, might do regarding daily fantasy sports as a legislative effort gains steam in that state. A house editorial in the Sacramento Bee called for Harris to weigh in.

There has also been speculation or chatter in a number of other states that AGs could offer their opinions at some point.

Gimas / Shutterstock.com

Dustin Gouker
- Dustin Gouker has been a sports journalist for more than 15 years, working as a reporter, editor and designer -- including stops at The Washington Post and the D.C. Examiner.
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