Class Action Lawsuit Alleges Underdog Fantasy Runs Illegal Online Sports Betting in California

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A class action lawsuit claims that Underdog Fantasy illegally operates online sports betting in California under the misleading label of “fantasy sports” contests.

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According to the 27-page lawsuit, Underdog Fantasy offers two kinds of daily fantasy sports contests: “pick ‘em” contests and “drafts” contests, which involve players paying to make predictions on the statistics, scores and outcomes of upcoming sports matches. The suit argues that the contests are forms of sports betting under California law because they involve the exchange of money over the results of sporting events, making Underdog’s operation of these contests in the state illegal.

Per the complaint, in Underdog’s pick ‘em contests, players wager based on the predicted performance of specific athletes in an upcoming game—for example, whether or not a given player will score more than a specific number of points.

The drafts contests are similarly based on the performance of specific athletes in real-world games, the filing explains. However, rather than picking a single athlete and making a yes-or-no prediction on a metric provided by Underdog, the lawsuit states, drafts contest participants select several athletes whose performances they will track (a.k.a. their fantasy “team”). Users then acquire points in the contest based on those performances and will receive prizes if their “team” of athletes cumulatively acquires the most contest points, the suit says.

The filing argues that the pick ‘em style of contest is functionally indistinguishable from the proposition betting offered by traditional sportsbooks and that, similarly, Underdog Fantasy’s draft contests are easily comparable to traditional parlay betting.

Further, the lawsuit contends that, because the contest participants do not actually compete in the sporting events involved in the fantasy sports contests, the entry fees they pay for both the pick ‘em and drafts-style contests are, in fact, just wagers made on the performances of others and the uncertain outcomes of future events. The filing compares the pool of entry fees to a poker pot, since all participants pay to enter, but only the winner(s) will take portions of that money home.

In each contest it runs, Underdog retains a cut of the total pool of wagers paid by participants, the filing notes. As such, the lawsuit claims that Underdog Fantasy’s business model is built entirely on profits from sports betting, which has been illegal in California for over a century.

The complaint alleges that Underdog Fantasy’s use of the term “fantasy sports” is merely an attempt to dodge gambling regulations and, alongside Underdog’s lack of clear disclosures of the true nature of its business, mislead participants into thinking its contests are legal.

The Underdog Fantasy class action lawsuit seeks to represent anyone who played and lost money wagering on Underdog’s online daily fantasy sports contests within the applicable statute of limitations period.

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