Massachusetts Class Action Targets PrizePicks

In a landmark legal move, major fantasy sports operators PrizePicks, Underdog Fantasy, and Yahoo Fantasy Sports are facing a class action lawsuit in Massachusetts over allegations of illegal gambling. The lawsuit claims that these companies improperly offered pick’em bets and prop-style DFS, pushing the boundaries of fantasy sports regulation.

Massachusetts Class Action Filed Against PrizePicks, Underdog for Illegal Betting

Several top fantasy sports operators, including PrizePicks, Underdog Fantasy, and Yahoo Fantasy Sports, have been hit with a class action lawsuit in Massachusetts over their alleged illegal offering of pick’em and prop bets. Filed by Massachusetts attorney Joseph Curran on October 17, 2024, the lawsuit accuses the companies of violating state laws by offering unlicensed sports betting services under the guise of daily fantasy sports (DFS).

Key Points:

1. Pick’em Bets Under Scrutiny: PrizePicks, Underdog Fantasy, and Yahoo Fantasy Sports are accused of offering pick’em and prop-style DFS bets, which allegedly violate Massachusetts gambling laws.
2. $10M Monthly Revenues: The lawsuit claims these companies generated over $10 million per month from what it describes as unauthorized gambling activities.
3. Legal Recovery Sought: The plaintiff seeks recovery of wagered funds under Massachusetts law, alleging consumer protection violations.

The Allegations

At the heart of the case is the controversial offering of pick’em bets, a form of prop-style DFS where participants select the outcomes of individual player performances rather than engaging in traditional fantasy sports contests. While this form of betting gained popularity in 2024, many states, including Massachusetts, viewed it as illegal gambling, prompting regulatory crackdowns.

The lawsuit states that these fantasy sports companies violated Massachusetts General Law Chapter 137, which governs unauthorized gambling and allows for the recovery of funds lost in illegal gaming activities. The complaint further highlights that companies like FanDuel and DraftKings—which offer similar services—hold the necessary licenses to operate both DFS and sports betting in Massachusetts. In contrast, the defendants are accused of operating only with DFS licenses while illegally offering sports betting products.

The Financial Impact

The lawsuit claims the operators generated substantial revenues—over $10 million per month—from these alleged illegal betting operations. Additionally, it argues that their activities deprived the state of significant license fees and tax revenue, with licensed operators required to pay taxes of 15% on retail betting and 20% on online betting.

Curran’s complaint alleges that PrizePicks and Underdog Fantasy stopped offering these betting options around March 2024, following a settlement with the Massachusetts Attorney General’s office. However, the lawsuit asserts that Yahoo Fantasy Sports may still be offering these types of bets, further exacerbating the regulatory violations.

Legal and Industry Repercussions

The lawsuit marks the latest chapter in the ongoing legal and regulatory debate surrounding daily fantasy sports and its blurred lines with sports betting. While fantasy sports operators have historically operated in a grey area under DFS regulations, this lawsuit underscores the growing pressure on companies to comply with stringent state laws that differentiate between DFS and traditional gambling.

This case also highlights a broader issue: the lack of uniformity in the classification of fantasy sports products, particularly as new betting formats like prop bets continue to evolve. Massachusetts has been one of several states to take a hard stance on such activities, prompting companies like PrizePicks and Underdog to halt their contested offerings in the state.

With the class action lawsuit now filed in Essex Superior Court, Massachusetts has drawn a firm line in the sand over what it views as unlicensed sports betting masquerading as DFS. The outcome of this case could have widespread implications for the fantasy sports industry, particularly as states move to regulate emerging gambling formats. Should the court side with the plaintiffs, it could lead to significant financial penalties for the companies involved and force a reevaluation of how DFS operators manage their offerings in regulated markets.

This lawsuit also serves as a reminder to operators in the evolving gambling space that state laws must be strictly adhered to, or companies risk facing costly legal challenges and regulatory action.