Top sports betting operator DraftKings has agreed to settle a class-action suit filed over its 2019 Sports Betting National Championship, putting a punctuation mark on some of the controversy surrounding the first-of-its-kind, three-day event. Law360 reported the settlement on Monday.
The January 2019 $10,000 buy-in competition awarded a $2.5 million prize pool, including a million dollars for first place, but it ended in chaos when some bettors couldn’t access their funds in time to wager on the final game of the weekend. This was the result of inconsistency in how quickly different bets were graded by the operator and its sportsbook partner Kambi.
That inconsistency was present prior to the final day of betting, according to Christopher Leong, the lead plaintiff in the class-action suit. He ran into issues on the second day of the competition that he felt diminished his chances of climbing the leaderboard.
If the settlement is approved, Leong will now get the majority of his buy-in back, as he’s being awarded $7,000. Everyone else who entered the event — 260 players in all — would have $150 in “DraftKings Dollars” (site credits) deposited into their accounts as a result of the deal. The settlement also includes payment of up to $66,288 in attorney fees to cover Leong’s representation.
So, the lawyers are the big winners, Leong comes out either a modest winner or a modest loser depending on your perspective, and everyone else gets a drop in the bucket, whether they had a claim to much more than $150 or nothing at all. And DraftKings gets out with a total hit to its bottom line of just over $100,000.
The agreement caught the sports betting community off guard. And nobody was more surprised than Leong himself.
When he spoke to NJ Online Gambling in depth on March 4 for our comprehensive oral history of the inaugural event, Leong, while still lamenting that the competition was “not fair,” was resigned to the near-certainty that his lawsuit was for naught.
“DraftKings didn’t offer us anything,” Leong said at the time. “They didn’t offer us a dime. I believe they hired one of the top lawyers in New York City. They took it pretty seriously. I got nothing at all out of it.”
We contacted Leong on Tuesday morning and asked him what changed.
“I’m as confused as you are,” he replied. “The last time I spoke to [my lawyer] Mac [VerStandig] before three days ago was last summer, and he essentially told me that we’re screwed. Fast-forward to three days ago and he’s sending me a settlement to sign. [I have] no idea what happened in between all that, but I’m happy to receive anything given we thought we were already done for.
“Going into the lawsuit, anything less than the entry fee [would have been] a huge kick in the teeth,” Leong continued. “Funny how things change. One year later, when you’re expecting $0, $7,000 suddenly feels like a win.”
One person who doesn’t feel like he scored a win — no, not even if 150 DraftKings Dollars pop up in his account soon — is Rufus Peabody. He finished in third place and profited more than $320,000, but, because one of his bets was not graded in time, won about $800,000 less than he otherwise would have.
After the NJ Online Gambling oral history article ran on March 19, Peabody felt his claim to being owed money by DraftKings was strengthened.
He did not, however, pursue his legal case further after the article came out.
“There hasn’t been any movement on my end,” Peabody told NJ Online Gambling Tuesday, explaining that he wasn’t confident his case would be solid enough unless he could get a representative of Kambi on the record to confirm that wagers were graded in an irregular manner — even though other bettors said as much in the oral history.
Now that the class-action suit has been settled, though, “I am going to reach out to my lawyer again,” Peabody said. He speculated that the timing of the settlement might have been connected to DraftKings wanting to clear potential liabilities before it goes public as part of an acquisition deal with Diamond Eagle Acquisition Corp.
There would be a degree of irony if settlement of the class-action suit propels Peabody toward his own settlement, since he believes the filing of the class-action suit in 2019 was extremely costly to him.
“[DraftKings co-founder and Chief Revenue Officer] Matt Kalish and I actually had a discussion about my expected-value loss,” Peabody explained. “We discussed the expected harm of my money being locked up and me not being able to place a bet. They thought it was about $300,000 in expected-value loss. I argued it was about $400,000.
“I think this was the day after the event ended. Then I hear from my lawyer that there’s going to be a class-action lawsuit, he got wind of this, and we should try to get a settlement hammered out that night. We didn’t know the impact the class-action suit would have on us from a negotiating perspective. But given that they seemed amenable to a settlement in that area between $300,000 and $400,000, the hope was that something would get done.
“My personal opinion is, I strongly believe that this class-action suit cost me $300,000, at least. I would have had a settlement within a few days of the end of the contest. I truly believe that. Then this class-action suit changed everything.”
According to Law360, a hearing on the proposed settlement between Leong and DraftKings is scheduled for May 18.
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