TLDR
- A lawsuit filed in Massachusetts on behalf of a California resident targets DraftKings’ Predictions platform
- The suit claims Predictions is sports betting disguised as trading
- It cites CEO Jason Robins saying customers do not understand the difference between the two products
- DraftKings says Predictions follows federal law under the Commodity Exchange Act and CFTC rules
- Data in the filing shows most trading volume comes from sports markets in states where sports betting is illegal
DraftKings is facing a new lawsuit in California over its Predictions product. The complaint was filed in Massachusetts on behalf of a California resident.
The lawsuit claims Predictions is not really a trading platform. Instead, it argues the product is sports betting with a different name.
This comes weeks after DraftKings merged Predictions into its main app. The company calls this combined platform a super app.
The filing states that branding the product as trading misleads customers. It says people are led to believe the activity is safe and legal.
The suit points to comments from CEO Jason Robins. He has said customers do not really understand the difference between sportsbook bets and Predictions.
Robins has also called prediction markets a big growth opportunity for the company. Last year he said this was the most optimistic he has felt about the future of DraftKings.
How DraftKings Defends the Product
DraftKings says its Predictions product follows federal law. A company spokesperson said it operates under the Commodity Exchange Act.
The company also says it works within rules set by the CFTC. Other platforms like Kalshi and Polymarket operate under the same framework.
DraftKings says it remains confident in its legal position. The company plans to keep fighting the lawsuit.
The suit claims users can bet on outcomes like whether the Los Angeles Dodgers win another World Series. It argues these contracts mirror bets already offered on the sportsbook.
The complaint says the real difference is where Predictions is marketed. It claims the product is being promoted in states where sports betting is not legal.
What the Trading Data Shows
The lawsuit cites data showing about two thirds of activity on the platform comes from sports markets. Nearly 70 percent of that volume comes from states where online sports betting is illegal.
The filing argues DraftKings is using consumer confusion to sell an unlicensed product. It calls the offering illegal in the states named in the suit.
The complaint also mentions company earnings. DraftKings reported about 3.4 billion dollars in annualized consumer volume for the week ending June 21.
The plaintiff argues this figure shows how profitable the product has become. Damages are being sought for players in Alabama, California, Florida, Georgia, Minnesota, New Mexico, South Carolina and Texas.
This case comes as multiple states debate how to regulate prediction markets. Officials are trying to decide if trades on sports outcomes should count as gambling.
The outcome could affect how DraftKings runs its Predictions product going forward. It could also shape rules for similar platforms across the country.
