We’ve previously observed that the Daily Fantasy Sports (DFS) industry, by its nature and methodology, invited litigation from private plaintiffs, in multiple recent cases that often centered on allegations of unfair and deceptive marketing practices, misappropriation of insider information (to others’ disadvantage), and/or general illegality. In one of these efforts, a well-regarded and quite successful south Florida attorney, Ervin Gonzalez, filed a comprehensive class action complaint against multiple DFS operators and financial backers:

http://www.legalsportsreport.com/wp-content/uploads/2015/10/Florida-Class-action.pdf

Plaintiff-oriented practitioners may want to model their complaints on Mr. Gonzalez’ work.

Apart from private litigants, press reports reflect that at least two federal grand juries (one in NYC and one in Tampa) are studying whether crimes have been committed, and by whom, by or in connection with DFS-based gambling enterprises–and, yes, gambling is precisely the right word for what DFS offers, according to the NY Attorney General (and many others, including Nevada’s gambling regulators).  In the much-reported NY AG’s ongoing efforts in state court to halt DFS’ illegal gambling in that state, the parties have argued for and against the AG’s requested injunctive relief, and they have filed numerous pleadings and supporting documents.  (The case has been submitted to the trial judge.) Among these filings is a detailed affidavit of a university business/management school’s Dean, Donald Siegel, establishing both his expertise and the bookmaking which is the essence of DFS:

https://iapps.courts.state.ny.us/fbem/DocumentDisplayServlet?documentId=AyR2s9wb4WcE4UaHePGRaQ==&system=prod

In opposition, of course, the DFS defendants filed affidavits from their retained experts, trying to persuade that skill predominates in determining winners among DFS bettors (although that doesn’t seem to be the key issue under present NY law):

https://iapps.courts.state.ny.us/fbem/DocumentDisplayServlet?documentId=hA6u1Mg3E4vZGP_PLUS_XLAb9Ow==&system=prod

https://iapps.courts.state.ny.us/fbem/DocumentDisplayServlet?documentId=dMtLMbZukZ08w1cIYglONg==&system=prod

and an affidavit–somewhat whiny, perhaps–of the DraftKings CEO:

https://iapps.courts.state.ny.us/fbem/DocumentDisplayServlet?documentId=1B_PLUS_emvBaXEotK5e0fGC3iw==&system=prod

Another item filed in the case, minutes of a meeting of the DFS industry’s trade association, reflect that this same CEO made comments seemingly disregarding or misreading important aspects of UIGEA:

https://iapps.courts.state.ny.us/fbem/DocumentDisplayServlet?documentId=aV5XyIYHXY1nDiERFuBPJg==&system=prod

and evidently prompting further trade group discussion on compliance issues, as reflected in yet another filing:

https://iapps.courts.state.ny.us/fbem/DocumentDisplayServlet?documentId=/SxnHQxaTIE8H/OOOhBoGw==&system=prod

Of course, an easily-overlooked aspect of the whole DFS industry is that the games it offers actually involve two separate components (which the industry’s litigating position seems, inaccurately, to posit as being inextricably entwined): there’s (1) the fantasy sports contest, and (2) the gambling on the outcome.  In other words, if DFS games were really played merely for fun, for valueless points, for bragging rights, or for titles (such as “champion”), the comparative expertise of participants vs. the inherent chance of variable outcomes would not much matter–and the activity, if it truly had entertainment value on its own, would flourish.  But real world experience shows that the second component–gambling something of value on the contests’ outcome–is what drives the entire industry.  Let’s see how interested the DFS operators are in running their supposed skill contests without taking wagers (disguised as entry fees) and no longer scraping their vigorish from these funds.  (The same 2-factor dynamic is why online poker depends on gambling, since few will play for the fun/challenge of the card game, alone.  It’s the gambling that drives each industry, not the game.)

Treating human athletes as horses or dogs, to be handicapped and wagered upon in parlay bets, is the core of the DFS business model, and it necessarily shifts the focus of the sports fan from the athletic contest to a greed-driven monetary one. Short-sighted sports leagues and owners chasing the quick buck by investing in and partnering with DFS operators may be saved, in the long run, by a NY court ruling in favor of the state’s AG.

(Then, if you’ve not read it yet, read Natasha Dow Schull’s “Addiction by Design.”  If you don’t have it, put it on your holiday gift wish list–or just get it via your local library.)

2.  If you haven’t yet seen the Stop Predatory Gambling report regarding the daily fantasy sports (DFS) industry, see:
http://stoppredatorygambling.org/wp-content/uploads/2015/11/2015-Report-on-Online-Fantasy-Sports-Gambling.pdf

Combine that report with the NY Atty. General’s commonsense conclusion that DFS constitutes illegal gambling (see:  http://www.nytimes.com/2015/11/11/sports/football/draftkings-fanduel-new-york-attorney-general-tells-fantasy-sites-to-stop-taking-bets-in-new-york.html?emc=edit_na_20151110&nlid=73226449&ref=cta&_r=0) and litigators should see meaningful lawsuits can be brought on behalf of harmed, misled, and deceived individuals.  An industry that uses slot machines and DFS schemes to exploit human weakness has skated too long without being held to account.

1.  Bingo, as gambling, seldom gets much in the way of headlines, often being regarded as a somewhat unglamorous, unsophisticated game. Still, commercial bingo’s proven profitable to commercial gambling operators for years and, with the rise of the Internet, the game has joined the 21st century roll of essentially-slot-machine-like means of exploiting human weakness. With (as yet) little public notice, two pending bingo-based federal civil cases in California, recently combined by a federal judge’s order, may have large impact in the world of tribal gambling and elsewhere.
Both cases have the Iipay Nation of Santa Ysabel as named defendants, with one case being brought by the State of California and the other by the United States. Both plaintiffs seek to block the Iipay tribe from offering real-money online bingo and online poker, games which the tribe asserts fit within the category of Class II gambling under the Indian Gaming [sic] Regulatory Act (IGRA). Based on this novel and perhaps aggressive interpretation, the tribe had already begun the online bingo (at a site it named Desert Rose) without state approval. That operation was halted by an injunction the state obtained. In subsequent pleadings, the plaintiff-governments assert that both IRGA and tribal-state gambling compacts are violated by the offered or to-be-offered games which, by being offered online, constitute Class III gambling. The ultimate classification (II or III?) of these online gambling games, if online gambling is allowed at all (i.e., depending on whether the US DOJ’s much-criticized Dec. 2011 re-interpretation of the Wire Act gets reversed by legislation or by a new administration’s return to the long-correct interpretation of the Act), may have significant impact, especially given the controversy in California.
This blog’s brief summary, if course, omits details that counsel interested in tribal gambling litigation should note; if you are so interested, you are encouraged to review the cases’ pleadings and orders at U.S. District Court for the Southern District of California CASE NO. 3:14-cv-02724-AJB-NLS and CASE NO. 3:14-cv-02855-AJB-NLS. The combined cases, which now include a counterclaim and third-party complaint, are slated for trial on Feb. 9, 2016, before District Judge Battaglia.
2. Daily Fantasy Sports (DFS)-based cases exist in many jurisdictions, and other blogs cover many of these cases. This blog will do so, too, in future posts; however, for now, let’s look even a step beyond DFS gambling to the fad close on its’ heels: so-called “eSports” gambling. This growing practice involves (usually online) gambling on the actual electronic games played by the “gamer” community, often with proposition bets, and can also involve “fantasy” eSports betting.
Analysts forecast that these rapidly-growing forms of online gambling will generate scores of billions of wagered dollars as early as 2020. One such prediction, from Eilers Research, on Aug. 19, 2015, gushed that the “all-digital nature of eSports explodes the current limits on wagerable events within a given sports competition….open[ing] up new frontiers for online sportsbooks in terms of bet types, frequency, and customer control.” Litigators would do well to pay attention to this phenomenon and assess how best to affix liability on operators who violate applicable standards and laws when, as often happens, “new frontiers” in an industry develop by running roughshod over public health and safety.  With electronic games now being purposely-designed to be as addictive as possible, and with electronic gambling machines likewise being purposely-designed to be as addictive as possible (see Addiction by Design, by Natasha Dow Schull), the melding of the two seems likely to appeal to commercial gambling entrepreneurs’ basest instincts, with resultant tortious conduct and overreaching a near-certainty.

If you hadn’t seen it (and have some spare time), it’s instructive to review the massive-in-length complaint filed by the plaintiff, City of Boston, versus the state’s gambling commission and its officials.  You can access it by an internet search using the case’s filing number: 15-0012-BLS2.  It’s an impressive piece of pleading, setting out alleged flaws in the awarding of a casino license. Even if you’re not in Massachusetts, the pleading gives one a feel for what kinds of allegations these disputes involve–ones you may wish to raise when similar apparent chicanery in awarding of casino privileges can be proved where you reside.

From recent press coverage of the case, it seems Boston’s mayor has been meeting with Wynn commercial gambling personnel to perhaps discuss settlement.  One wishes the discussion would turn from dollars to policy.  Putting a commercial-gambling-cancerous outpost at the edge of Boston, one designed to drain resources from the already-poor (for example), seems like policy that a responsible administration would oppose entirely, rather than seek a financial settlement about.

A.  In the prior post, we mentioned that the federal judge (who is Hon. Frederick P. Stamp, Jr.) in the Stevens v. MTR Gaming Group, Inc., et al., case has certified several questions to the West Virginia Supreme Court (which is actually called the “Supreme Court of Appeals of West Virginia”).  You might have wondered what those questions might be.  Wonder no more, for here they are (although you may want to read the entire 8/25/15 Order in case WDWVa. case no. 5:14cv104 to more fully understand the context of the 3 questions):

1. What duty of care exists as to each defendant given the
allegation that the slot machines or video lottery terminals are
designed through the use of mathematical programs and algorithms to
create the illusion of chance while instead fostering a
disassociated mental state, to protect casino patrons from becoming
addicted to gambling by using these machines or terminals?
2. Are the gambling machines or terminals and specifically
the software in them a “product” under West Virginia products
liability law?
3. What legal duties, if any, arise under Moats v. Preston
County Commission, 206 W. Va. 8, 521 S.E.2d 180 (1990), given that
the suicide of Scott Stevens was a possible intervening cause?

The state’s high court has accepted the certified questions and established a briefing schedule, with the plaintiff’s initial brief due on November 2, 2015.

B. In a commercial gambling-related case not mentioned in the prior post, but which the PGLP has been watching, the Idaho Supreme Court issued a ruling last week. In a writ of mandamus case, Coeur d’Alene v. Denny, case no. 43169, the court ruled that mandamus should issue to compel the state’s Secretary of State to certify as law that the state legislature’s enactment of a statute to repeal its earlier authorization for so-called “instant racing” machines (which are also sometimes called “historical racing” machines or “horse slots”).

The case, ostensibly, relates to state-specific procedural issues and time-period-related responsibilities of the state’s executive branch; however, the events underlying the case appear to be that the commercial gambling industry misrepresented these EGMs to Idaho legislators as something different than addictive slot machines.  After the gullible legislature authorized these machines and they were brought into the state, it was quickly seen that any purported differences between horse slots and regular slots were immaterial.

Feeling tricked, the state’s legislators repealed the authorization, but the Governor and Secretary of State perhaps felt more loyalty to the commercial gambling industry than to the law and took steps to preclude the newer statute’s effect, but their true duty was rather clear, according to the Idaho court–and the attorney arguing the case on the state’s behalf felt the court’s wrath, given the basically unsupportable position he’d taken and evasive (or worse) answers/argument’s he’d supplied the court. Here’s a link to the opinion:  http://media.idahostatesman.com/smedia/2015/09/10/13/00/105d6s.So.36.pdf#storylink=relast

In no particular order of importance:

1. NCAA v. Governor of N.J., et al., nos. 14-4546, 14-4568, and 14-4569 (3d Cir. Aug. 25, 2015). Third Circuit panel rebuffs NJ’s effort to authorize sports gambling; some commentators predict en banc review or appeal to the USSC.
2. Kaplan v. Comm’r., IRS, no. 14-2342 (7/29/15); Eighth Circuit affirms Tax Court ruling imposing $37 million income tax, interest, and penalties liability on Gary Kaplan, previously-convicted operator of the then-largest illegal online sports book. Added to nearly $50m in forfeitures, case shows these prosecutions pay for themselves many times over: Tell your US Atty!
3. Judicial Watch, Inc. v. U.S. Department of Justice, no. 1:15-cv-1132 (D.D.C.).  Judicial Watch has filed a FOIA-based law suit vs. DOJ re the department’s ongoing failure to produce records relating to the Office of Legal Counsel’s evident misinterpretation of the Wire Act, announced in Dec. 2011; the defendant’s answer is due Sept. 18th.
4. Kelley, et al. v. Star Markets Co., Inc., no. 1581-cv-01174 (Middlesex Superior Court, MA) Injunctive relief and nominal damages sought by plaintiffs, whose complaint reveals supermarket chain’s disregard of responsibility for ensuring lottery ticket vending machines are not used by minors. When vendors’ interests are to sell as many tickets as possible, their continued exploitation and abuses of children seem likely, nation-wide.
5. Stevens v. MTR Gaming Group, Inc., et al, no. 5:14-cv-11111 (NDWV). Widow of respected businessman and community leader, turned addicted gambler and driven to suicide, sues a casino and slot machine designer/distributor.  Recently, the NDWV federal court has certified 3 state law questions to WVa. S. Ct. and denied, without prejudice (awaiting the answers to those questions), the defendants’ motions to dismiss.
6. Soto, et al. v. Sky Union LLC (“Castle Clash” case) and Phillips v. Double Down Interactive LLC (“Double Down” case) (both pending in Cook County, IL, Circuit Court). Plaintiffs identify unlawful gambling elements built into popular social media games.  Defense motions to dismiss pending.
7. Justin Curzi, On Behalf of Himself and All Other Similarly Situated Individuals v. Oregon State Lottery, IGT (Inc.), GTECH USA, LLC, and WMS Gaming Inc., case number 14CV20598 (Circuit Court for the State of Oregon, County of Multnomah).  The suit alleges the “auto hold” feature of video poker games is represented to players as implicitly providing the best possible playing strategy, but that the feature, in fact, does not maximize the players’ odds of winning and actually impairs those odds.  The suit seeks in excess of $134.0 million in monetary damages.  Appeal of the case’s dismissal is expected.
8. The Family Trust Foundation of Kentucky, Inc., d/b/a The Family Foundation v. Kentucky Horse Racing Comm’n., et al., no. 2010-CI-1154 (Franklin Circuit Court, Commonwealth of Kentucky).  Plaintiff seeks an advisory opinion regarding legality of so-called “instant racing machines,” also known as historical racing machines, which operate substantially as slot machines and are believed to present similar dangers. Case has been to Ky. S. Ct. already, which ruled plaintiff is entitled to discovery. Industry defendants appear to be non-compliant, which may suggest they have something to hide.  (In 2006, in a somewhat similar context, in Wyoming Downs Rodeo Events, LLC v. State, 2006 WY 55, the Wyo. S. Ct.  saw through the euphemistic “…racing” labeling of these electronic gambling machines (EGMs), saying “…[W]e are not dealing with a new technology here, we are dealing with a slot machine that attempts to mimic traditional pari-mutuel wagering. Although it may be a good try, we are not so easily beguiled.” Later, the state’s legislature was easily beguiled, however, and passed legislation authorizing these EGMs.)

Let’s begin with an ancient observation probably more academic-sounding than we might wish, but one that speaks a pragmatic truth (when considering the aggregate behavior of the commercial gambling industry and their governmental de facto partners):  “Quaeritur, ut crescunt tot magna volumina legis? In prompta causa est, crescit in orbe dolus.” [If you ask why there are so many laws, the answer is that fraud ever increases on this earth.] Lord Coke, Twyne’s Case (1601) 3 Co. Rep. 80b, 82a, 76 Eng. Rep. 809, 815-16 (K.B.).

The quote, sometimes used as an answer when folks complain of too much government intervention (via statutes and regulations) in business activity, might be seen as inapposite for a group seeking to remedy, via litigation, the wrongs of the commercial gambling + government partnership. Remember, however, victories in Predatory Gambling Liability Project-supported  litigation will also produce law:  common law, often fairer and more responsive to peoples’ needs than that generated by (as with commercial gambling in the United States) legislative and regulatory bodies “captured” by  a free-spending, influence-buying industry.

Given the systemic regulatory failures chronicled in Natasha Dow Schull’s 2012 classic book, Addiction by Design, all the more reason exists to use litigation against the culpable components of the commercial gambling/governmental partnership.  Doing so will help halt the spread (i) of ever-increasing fraud and crime, (ii) of failed public policies that necessarily increase both income inequality and disrespect for government (i.e., governments that once protected, but now help exploit, their citizens and allow the wealthy to profit from this exploitation), and (iii) of a growing and as-yet unaddressed public health crisis (evidence indicates, e.g., that gambling-driven suicides occur at far higher rates than with other addictions; and basic family health care needs often go unaddressed when needed funds are gambled away).  Provably, in an era of comparative fault, these consequences are not solely the product of irresponsible individual gambler’s choices but, rather, are the predictable, foreseeable harmful consequences of marketing strategies and game design, of misleading promises and deceptive euphemisms–in short, of today’s commercial gambling/government partnership.