Lawsuit Claims Underdog, PrizePicks, and Yahoo Offered Illegal Sports Bets in Massachusetts

Three popular fantasy sports platforms—Underdog Fantasy, PrizePicks, and Yahoo Fantasy Sports—are facing a legal challenge in Massachusetts. The lawsuit, filed by Joseph P. Curran in Essex County Superior Court on October 17, 2024, alleges that the companies were operating illegal sports betting under the guise of fantasy pick’em games. The lawsuit aims to recover triple the amount wagered by s in Massachusetts before March 2024, based on state laws regarding gambling losses.

Curran’s legal team argues that the pick’em games, which allowed players to bet on player performances in peer-to-house formats, qualify as unlicensed sports bets rather than legal fantasy sports offerings. The suit states, “Mr. Curran has standing to bring this action as plaintiff under Mass. Gen. Laws ch. 137, § 1,” and seeks damages under this statute, which permits recovery of three times the value of the wagers placed.

Traditional Pick’em Games Cease in Massachusetts

Underdog Fantasy, PrizePicks, and Yahoo Fantasy Sports had been offering traditional pick ’em-style games in which s predicted player outcomes against the house, but these games were available in Massachusetts until March 2024. In a move to regulate these games, the Massachusetts Attorney General’s Office issued cease-and-desist letters to several operators earlier in the year, including Yahoo Fantasy Sports. Other companies such as Boom Fantasy and Sleeper were also targeted by this regulatory effort.

Although both PrizePicks and Underdog Fantasy did not receive formal cease-and-desist orders, they voluntarily ceased offering their peer-to-house pick’em games in Massachusetts. These games have since been replaced with a peer-to-peer format, where players compete against each other rather than the house. Despite these changes, the lawsuit contends that the companies engaged in illegal betting activities before the modification of their offerings.

The core of the lawsuit revolves around the contention that these peer-to-house pick’em games constitute illegal sports wagers, a claim that has surfaced as daily fantasy sports (DFS) games increasingly blur the line between traditional fantasy contests and sports betting. “In actuality, while Defendants may have some offerings which are considered Daily Fantasy Sports, until March 2024 (and possibly beyond), they also offered sports wagers,” the lawsuit claims, adding that the companies were not ed to accept such bets in Massachusetts.

This ambiguity has been a topic of concern among regulators and industry experts, particularly as newer DFS formats—like pick’em games—resemble traditional sports betting. These games typically involve players making predictions on individual player statistics, similar to prop bets. However, the key distinction lies in whether the games involve competition against other players or the house, with the latter considered illegal under Massachusetts law without proper licensing.

Industry Reactions to the Lawsuit

Underdog Fantasy has firmly denied the accusations. A spokesperson for the company dismissed the lawsuit as a baseless attempt by Curran’s legal team to seek a settlement, stating, “It’s a completely transparent fishing attempt by a plaintiffs lawyer, and it will get dismissed sooner rather than later.” The company maintains that its operations are fully compliant with Massachusetts law.

Similarly, PrizePicks, another company named in the lawsuit, declined to comment on the legal action. Yahoo Fantasy Sports, also named, defended its practices by stating that its pick’em games are free-to-play and do not involve wagering on individual players.

The lawsuit has reignited the broader debate around the regulation of daily fantasy sports and sports betting. Pick’em games, in particular, have challenged regulators who must determine where to draw the line between fantasy sports and gambling. At the National Council of Legislators from Gaming States (NCLGS) winter meeting, lawmakers and industry insiders acknowledged the increasing difficulty of classifying certain DFS formats, particularly as the industry evolves to offer new types of contests.

Stacie Stern, Senior Vice President of government affairs and partnerships at Underdog Fantasy, highlighted the importance of reaching a compromise within the industry. “I personally root for DraftKings, for FanDuel, and for PrizePicks, and obviously Underdog – all of us as competitors – to win over customers and continue to serve them with innovative and fun contests,” Stern said.

Broader Implications and Regulatory Actions

The legal action against Underdog, PrizePicks, and Yahoo is part of a wider trend of increased scrutiny on DFS operators in multiple states. Earlier this year, Massachusetts regulators targeted several companies offering pick’em-style games, which resemble parlay bets, resulting in PrizePicks and Underdog agreeing to shift their business models to comply with local laws.

While the current lawsuit could lead to significant financial penalties for the operators, the ultimate outcome will likely depend on how courts interpret the distinction between DFS contests and sports betting. In the meantime, bettors in Massachusetts have three months to Curran’s suit in reclaiming funds. Should any funds remain unclaimed, they will be donated to charity.

Source:

”Lawsuit Filed Against PrizePicks, Underdog, Yahoo in Massachusetts for Pick’em Games”, saturdaydownsouth.com, October 18, 2024.