In a major setback for the two largest daily fantasy sports (DFS) operators, DraftKings and FanDuel failed to reach a settlement in their class action lawsuits on Wednesday. The companies are now headed for arbitration, where the stakes could be much higher.
The lawsuits, which were filed last year, alleged that the DFS operators engaged in false advertising and Unlawful gambling. The plaintiffs sought refunds for all of the money they spent on DFS contests, as well as damages.
The companies had been in settlement talks for months, but Wednesday’s deadline came and went without an agreement. A hearing on the arbitration fight is scheduled for May 2nd.
Both sides have already indicated that they will vigorously fight the case. For DraftKings and FanDuel, arbitration could be a better option than a trial in front of a jury. The companies are likely to argue that their contests are games of skill, not chance, and that they therefore should not be subject to gambling laws.
The plaintiffs, meanwhile, are likely to argue that the DFS contests are nothing more than a form of gambling, and that the companies should be required to refund all of the money spent on their contests.
The outcome of the arbitration fight is far from clear, but it could have a major impact on the future of DFS. If the companies are found to be in violation of gambling laws, they could be forced to shut down operations in the United States.
