California Class Action Suit Against FanDuel Dropped…For Now

The voluntary withdrawal of the plaintiff's complaint in a California class action lawsuit against FanDuel suggests that the gaming corporation is avoiding protracted legal action in the state, at least for the time being.

Martin Beltran filed the lawsuit in July, claiming that because California forbids sports betting, FanDuel's daily fantasy sports (DFS) competitions should be prohibited in the state since they constitute wagering rather than skill-based games. In an attempt to recover money they feel the gaming corporation "unlawfully took from them," Beltran filed the lawsuit on behalf of himself and "similarly situated Californians."

FanDuel allegedly broke the California penal code by accepting client money for events with contingencies or uncertain outcomes, according to the lawsuit filed in the US District Court for the Northern District of California.

"Put simply, a company violates California Penal Code Section 337a when it engages in pool selling, bookmaking, or accepts or records any bets or wagers on the result of any contest and/or any unknown or contingent event whatsoever—including, without limitation, bets associated with the performance of persons, such as in fantasy sport,” according to a July legal document.

Since 2015, FanDuel, a division of Flutter Entertainment (NYSE: FLUT), has provided DFS games in California. Beltran's and the class's attorneys sought a declaratory judgment on the grounds that FanDuel had broken California's Consumer Legal Remedies Act and unfair competition legislation.

What's Up Next in the California Legal Rift for FanDuel?

Beltran's lawsuit has been withdrawn, according to a Notice of Voluntary Dismissal dated September 8. However, FanDuel allowed the lawsuit to be dismissed without prejudice, so it may be brought again at a later time. Additionally, a tolling agreement is in effect, which permits the class to continue the lawsuit after the statute of limitations has passed.

Tolling agreements and voluntary dismissals together are interpreted by some legal experts as an indication that the parties concerned are trying to reach an agreement. The tolling agreement permits the lawsuit to be reopened in the event that a settlement cannot be achieved. FanDuel and the class's attorney have not made any public announcements about the existence of these discussions.

It's also important to note that FanDuel's alleged tactics to take advantage of weak bettors were not the main focus of the Beltran lawsuit. Instead, the lawsuit focused on the claim that DFS companies violate California law because to the state's 2022 voters' resounding rejection of sports betting.

“In fact, as the California legislature re-affirmed in 2008, ‘no person in this state has a right to operate a gambling enterprise except as may be expressly permitted by the laws of this state,” said the Beltran suit, citing the state’s business and professional code.

DFS Grim's prospects in California

It's interesting to note that the Beltran lawsuit was filed in the same month that DFS was essentially outlawed in California according to state law. Given that California is the DFS industry's biggest source of revenue, that could provide some challenges for smaller, DFS-dependent firms.

The prohibition serves as yet another reminder that tribal casino operators in California have considerable influence over the growth of gaming, and it will be difficult for the competitors to compete if they don't support products that conflict with their own interests.

Due to exclusive agreements with California, tribal operators are in charge of things pertaining to the growth of gaming in the state. Additionally, they have a lot of political clout in the state, which suggests that DFS operators would have trouble finding advantageous legal options to stay in the Golden State.