DraftKings got into prediction markets to compete with the likes of Kalshi and Polymarket. It has now found something else in common with that duo: lawsuits alleging its platform is an illegal sportsbook in disguise.
When the company launched DraftKings Predictions in December, its chief product officer, Corey Gottlieb, told Front Office Sports the plan was to build “something that’s scalable, responsible, and sustainable long-term.” Sports-event contracts were only made available in states where online sports betting is still illegal, like California, Texas, and Georgia.
While other prediction-market companies like Kalshi, Polymarket, Crypto.com, and Robinhood have faced numerous lawsuits claiming they offer sports betting by a different name, DraftKings has pushed deeper into the industry.
But now it’s been hit with three lawsuits within the last week, including two proposed class actions, with the plaintiffs alleging that DraftKings Predictions is nothing but an illegal sportsbook masquerading as something else. The suits come ahead of DraftKings’ earnings release on Thursday afternoon.
A DraftKings spokesperson tells FOS its prediction-market app “operates in accordance with applicable law and the federal regulatory framework established under the Commodity Exchange Act. We remain confident in our legal position.”
The new lawsuits echo many of the arguments already being made against companies like Kalshi and Polymarket, contending that the use of language like “event contracts” or “trading” does not change that what is fundamentally being offered is sports betting.
The first of the three suits, filed in Massachusetts federal court July 28, is a proposed class action that claims DraftKings “misleads consumers into believing the activity is lawful and safe. It is neither.” The lead plaintiff, Michael Chan, says he was “not informed by DraftKings that Predictions is an unlicensed sportsbook when he wagered and lost money on the app.”
The suit does not specify how much he lost using the app, nor does it state a potential amount of damages. It says the class would likely feature thousands of members.
The second lawsuit is not a class action and was filed July 29 in South Carolina state court. It names DraftKings, Polymarket, Crypto.com, and others as defendants (although not Kalshi). The suit cites a centuries-old provision known as the Statute of Anne, which allows third parties to sue for damages on behalf of bettors. The same statute was cited in five state court lawsuits filed against Kalshi, Robinhood, and others in June of last year.
The suit from plaintiff James M. Hughes notes that sports betting “has been illegal in South Carolina since 1912. The state’s laws are unambiguous.” It notes that “it would seem catastrophically foolish to set up such an operation in this state.”
Hughes doesn’t specify an amount of damages, although he wants three times the amount of total South Carolina consumer losses on prediction-market platforms plus the costs of his suit. Under South Carolina law, Hughes would receive half of any damages figure, with the rest going to the county in which the “illegal bets were placed,” according to the lawsuit.
The third suit, filed Aug. 3 in Massachusetts federal court, is a proposed class action led by three plaintiffs who all claim they lost money betting on DraftKings Predictions: Jason Gordon, Aerie Weissmann, and Johnny Harris. It describes DraftKings Predictions as “an illegal unlicensed sportsbook.”
Gordon says he lost over $700 betting on DraftKings Predictions, Weissmann says he lost more than $1,000 and enrolled in the company’s self-exclusion program in March in order to protect himself from losing more money, and Harris says he lost over $100, plus transaction fees.
Their suit says there will likely be thousands of class members across states where online sports betting either remains illegal, or is significantly limited, including Alabama, California, Florida, Georgia, South Carolina, Texas, and Utah.
A representative for the plaintiff in the South Carolina case declined to comment beyond the lawsuit. Representatives for the plaintiffs in the other suits did not immediately respond to requests for comment, nor did Polymarket and Crypto.com.
