Early Saturday morning, Florida attorney Ervin Gonzales filed the class action lawsuit, o that could turn into the biggest headache the daily fantasy sports industry has ever seen.
The lawsuit, which was filed on behalf of Florida residents Antonio Gomez and John Gerecs alleges that DFS operators and their investors are engaged in illegal gambling.
Furthermore, Gomez and Gerecs allege that DFS sites acted in a deceptive manner by luring average players into competition with industry employees who had access to insider information.
Should this particular legal action gain class-action status, the daily fantasy sports industry could be facing a the same sort of Black Friday apocalypse that brought down the US-facing online poker industry in 2011.
While the insider trading portion of the lawsuit is significant on its own, it’s the portions that include the DFS industry’s laundry list of high profile investors which include the NBA; NHL; MLS; MLB; the owners of the New England Patriots and Dallas Cowboys; JP Morgan Bank; Payal; Capitol One; and many more.
If these stakeholders, particularly the payment processors, decide their relationship with the DFS industry is potentially toxic, that will be that for US-facing DFS.
After all, neither DraftKings nor Fan Duel have shown a profit and both are very reliant on investors and new customer acquisition. An ugly lawsuit that scares off payment processors and investors could be all it takes to end the DFS party in America once and for all.
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