Wednesday, December 13, 2017
Business

Pinellas lawsuit alleges DraftKings, FanDuel are illegal gambling sites

Nelson C. Steiner's lawyers say he doesn't spend time on fantasy sports websites where participants can win big cash awards based on the real-life performance of professional athletes.

Steiner, once described as the baron of Tampa Bay's mobile home industry, has never lost a dime on two of the most-popular sites, FanDuel and DraftKings.

Still, the St. Petersburg resident is suing both.

Steiner's attorneys filed suit in Pinellas-Pasco Circuit Court on Monday accusing the companies of operating illegal gambling in Florida and depriving the state of substantial tax revenue.

The suit asks a judge for an injunction to stop FanDuel and DraftKings from collecting money from customers in Florida and ultimately seeks the forfeiture of any illegal proceeds to the state of Florida. A judge could ultimately award Steiner money if the suit is successful.

"We believe the entire wagering pool is an illegal collection of money and the defendants should be required to disgorge the entire amount they have collected from Florida residents," said attorney Guy Burns with the Tampa Bay firm of Johnson, Pope, Bokor, Ruppel & Burns, which represents Steiner. "They're taking a staggering amount of money out of the Florida economy."

Steiner, 72, will not comment about the litigation, his attorneys said. A spokeswoman for FanDuel declined to comment, and DraftKings did not return messages.

The suit is the latest, and perhaps most unusual, challenge to the multibillion-dollar fantasy sports industry, which is facing a vigorous legal assault on multiple fronts across the nation, including a federal grand jury investigation in Tampa.

On Tuesday, New York's attorney general told FanDuel and DraftKings to stop taking bets in that state because their games amount to illegal gambling.

Steiner's lawyers, who are not working with Florida officials, are using a seldom-used provision of Florida law that has been more typically employed to allow those harmed by an illegal gambling operation to seek damages.

Burns said past cases have included a scenario in which a husband loses the rent money gambling and his wife files suit to recover the loss. But he said the law nonetheless allows somebody like Steiner to sue even if he has not suffered harm.

The law firm broached the idea of the suit with Steiner, a real estate investor and mobile home park owner who was a previous client, Burns said.

This provision of law, Burns acknowledged, has not been used in many years, and he said those existing instances he has seen in case law are "pretty old and cold."

The law requires the plaintiff to notify the local state attorney, and since Steiner lives in Pinellas, the lawyers sent a copy of the lawsuit to Pinellas-Pasco State Attorney Bernie McCabe.

The law allows McCabe to take over the case if Steiner doesn't diligently pursue the litigation, Burns said.

Steiner's lawsuit said the DraftKings and FanDuel websites engage in "seductive" advertising that entices participants with the potential of rich winnings.

In 2014, the suit said, Draft­Kings alone flooded Florida with 1,782 TV ads. In September 2015, the website spent $23.6 million on television advertising in Florida, the lawsuit said.

"It is well established that gambling adversely affects the public welfare," the lawsuit said.

And since Florida allows some gambling that generates tax revenue, "illegal gambling deprives the state of legitimate tax revenues which would be received if the illegal wagering were done under proper state laws."

And those legal gaming activities create jobs and provide economic benefits, the suit said.

The websites work by allowing participants, who usually pay a fee to enter, to draft teams of real professional sports players. Entrants then compete using the real-life statistics generated by the players. Winnings, the New York Times said, can approach $2 million.

But in 1991, then-Florida Attorney General Robert Butterworth wrote an advisory opinion concluding Florida law "prohibits the operation and participation in a fantasy sports league whereby contestants pay an entry fee for the opportunity to select actual sports players to make up a fantasy team whose actual performance statistics result in cash payments from the contestants' entry fees."

No fantasy sports company, however, has been prosecuted under Florida law.

A bill filed this week by state Sen. Joe Negron and Rep. Matt Gaetz would declare that fantasy sports are games of skill and not forms of gambling.

Under the proposal, Florida would create new regulations forcing companies like Draft­Kings and FanDuel to put in safeguards to prevent underage participants and bar employees of fantasy sports sites and their relatives from manipulating results, as they have been accused of doing in other states.

Fantasy sports companies also would have to pay $500,000 each to operate in Florida and $100,000 annually. Negron said those hefty fees would pay for creating the regulatory enforcement arm, rather than making taxpayers foot the bill.

Times researcher John Martin contributed to this report. Contact William R. Levesque at [email protected] or (813) 226-3432. Follow @Times_Levesque.

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