closing; class action lawsuit targets DFS payment processors

tradesports-closes-daily-fantasy-class-action-credit-cardsDaily fantasy sports operator TradeSports has announced it’s shutting down due to its inability to make money.

In a notice sent to players this week, announced that it would stop offering contests as of Nov. 30. Players have been asked to request a “final withdrawal” of their funds no later than Dec. 4, although customer funds will remain available “at least through the end of the year.”

TradeSports said the DFS landscape has “changed dramatically over the last two years, and much more so in just the last two months.” As a result, TradeSports was “unable to attract a sufficient number of customers to forecast the scale and potential profits needed to justify further investment.”

TradeSports said the “recent negative events” had boosted its operating costs, which meant the site wasn’t “making enough (any) money, and it’s now going to be much harder to do so in the future.” The company said it intended to “focus on other opportunities other than daily fantasy style contests.”

At least one payment processor has been forced to reconsider its dealings with DFS operators after New York Attorney General Eric Schneiderman formally accused DraftKings and FanDuel of being illegal gambling businesses. Now a New York resident has filed a federal class action lawsuit against credit card companies for collecting “illegal gambling debts” on behalf of DFS operators.

Plaintiff Yehuda Guttman accuses Visa, Mastercard, American Express, JPMorgan Chase, Capital One and Merrick Bank Corp of unjustly enriching themselves by providing credit to DFS customers for play on “illegal sports gambling websites” like DraftKings and FanDuel. Payment processors Vantiv, and USA are accused of acting as an intermediary between the DFS sites and their customers.

Guttman accuses the DFS sites of intentionally misrepresenting the legality of their businesses to customers, while offering contests that are “intentionally unfair” due to the (since discontinued) participation by DFS employees, which Guttman claims renders all contracts with DFS players “unconscionable and void of good faith.”

Guttman wants the court to put an end to banks and payment processors’ ability to provide services to DFS operators while seeking restitution for “all monies wagered and lost” via the sites over the past six years, which Guttman believes “exceeds $5m to a reasonable probability.”

Meanwhile, a couple of DFS touts have challenged Schneiderman’s assertion that DFS is illegal in New York because of its reliance to a “material degree” on the element of chance, and they’re willing to bet $100k that he’s wrong.

James Davis and Doug Norrie, whose site offers player lineup recommendations to DFS end users, have publicly challenged Schneiderman to square off against a DFS pro of their choosing in 100 DFS contests. If Schneiderman wins 50 or more of these contests, the pair will donate $100k to New York City schools or a charity of Schneiderman’s choice.

Should their chosen pro prevail in 60 or more contests, the touts want Schneiderman to “acknowledge that DFS is a game of skill, not of luck” and either retract the cease & desist order he gave DraftKings and FanDuel last week or at least admit that the order “is about something other than the absurd notion that daily fantasy sports do not involve skill.”

The touts say they’re prepared to put the $100k into escrow, should Schneiderman agree to their challenge. They claim to be sure that Schneiderman “will not be able to refuse” the chance to boost school funding and have encouraged “other DFS outfits” to add to the kitty, which has since risen to $108,500.