After being the subject of numerous lawsuits that date back more than five years, DraftKings is putting some longstanding legal issues behind it.  

Bloomberg Law reported on March 4, 2021, to settle the consolidated list of class-action lawsuits sent to the federal court in Boston in February 2016. The cases largely stem from allegations DraftKings and FanDuel had misrepresented how tough it would be to win in its promotional material surrounding Daily Fantasy Sports (DFS) contests.

DraftKings Not Lonely at the Top

DraftKings’ number one competitor, FanDuel, is also part of the consolidated class action lawsuits for many of the same reasons. While DraftKings appears to be putting its past behind, FanDuel’s claims are still unresolved.

The allegations towards both DFS companies are centered mainly on misleading marketing efforts, primarily around the skill required to be a winning DFS player. Some deal with dishonest claims regarding restrictions for not matching players’ first-time deposit bonuses.

Then, there is the original sin stemming from a that alleged employees at the two sites were trading insider information, including access to the percentage of ownership ahead of time to exploit tendencies to their strategic benefit. The scandal led to the legalization and regulation of the industry in many states.

Furthermore, both sites now prohibit employees from competing on other DFS sites.

DraftKings Lawsuit Settlements: Who Is Getting Paid?

As reported in Bloomberg Law, approximately 3.15 million DraftKings players will receive a share of the $8 million settlement. That $8 million will be divided into two separate funds, with more than 90% of it ($7.28 million) going into one fund and the remaining $720,000 used for a smaller, second fund.

I’ll leave it to the reader to do the math on the amount a customer will receive from the DraftKings lawsuit.

The larger $7.2 million fund will be used to pay back active players. However, it will not be paid in cash, but rather as “DK Dollars.” DK Dollars have an equivalent cash value but must be spent on DraftKings, meaning active players will effectively have house money to use on future DFS competitions. There was no mention of minimum wager requirements before players can withdraw any prizes earned from using their DK Dollars.

The second fund is reserved for eligible customers that closed their account at some point during the DraftKings lawsuit. Those players will receive their shares via cash payments.

All players who made a first-time deposit before January 1, 2018, and have taken a net loss lifetime on DraftKings are eligible for a share of the settlement.

The Move to Sports Betting

DraftKings announced 2020 third-quarter revenue of $133 million and followed that up with another $322 million . The company’s 2021 projected revenue is in the range of $750 million to $850 million. When looking at these figures, $8 million seems a small price to pay for DraftKings to end a five-year-long legal battle and continue moving forward with US sports betting opportunities.

DFS contests have been DraftKings’ primary association through the years, but the company is also at the forefront of the sports betting industry in the United States with its DraftKings Sportsbook. Legal sports betting is up and running in over half of the country, and DraftKings has operational sportsbooks in 11 of those states.

New Jersey, Pennsylvania, Illinois, and Colorado are all among those states, too, all of which will see billions of dollars wagered throughout 2021 and have markets that are only continuing to expand.

DraftKings’ stock price is also at an all-time high, which seems to reflect investors’ confidence in its ability to continue to expand in a booming industry. Many states have legalized sports betting, but there are still plenty of big states on the horizon. The success in the first-mover states serves as a road map for these future states to get on board while creating a safe, secure, and engaging way for sports bettors and fans to get involved, and DraftKings is one of the names likely to benefit from this continued growth.