DraftKings took the sports gambling world by storm when it announced a deal that would allow it to become the first publicly-traded sportsbook in the US. A valuation of over $1 billion attracted a lot of attention, and not necessarily from the right people. DraftKings is going to need its legal team to step up and work overtime, as the company is now facing two different lawsuits that could potentially cost it millions of dollars. For that to happen, though, the plaintiffs have to be very clear in their arguments, and this is where things get muddy.
DraftKings Accused of Stealing Technology
Large, successful companies are used to dealing with lawsuits looking for a money grab, so DraftKings’ legal team is probably ready for most attacks. The lawyers will have fun with Engine Media Holdings, a company that offers different services to the sports gambling and eSports markets. Its WinView subsidiary has hit DraftKings with a patent-infringement lawsuit, arguing that the operator has violated two patents it controls. Specifically, WinView accuses it of using technology that is identical to its “Methodology for Equalizing Systemic Latencies in Television Reception in Connection with Games of Skill Played in Connection with Live Television Programming” and “Method Of and System For Managing Client Resources and Assets for Activities On Computing Devices” methods. The patent numbers are 9,878,243 and 10,721,543, respectively.
WinView and Engine Media will have to fight that battle while defending itself on another front. The company’s own investors filed a lawsuit earlier this year against two former WinView board members and its largest shareholder, who are alleged to have strived to put their own interests above those of the company when Engine Media Holdings was emerging last year. The good news for the company is, as a result of its DraftKings lawsuit, Engine Media stock shot up 25%, which could come in handy as it fights the legal battles.
DraftKings to Face Investor Lawsuit
While DraftKings’ legal team begins preparing for the WinView suit, it was likely putting together documents for a separate suit it knew was coming. A little less than a month ago, a known short-seller with Hindenburg Research dropped several bombs about the company’s public launch and its relationship with SBTech. DraftKings wasn’t too happy with the report, which had resulted in its stock price taking a dip. Company lawyers may have already been working to mount an offensive attack against Hindenburg, but will have to prepare a strong defense, as well. A class-action lawsuit has been filed because of the information alleged in the Hindenburg report.
The lawsuit accuses DraftKings executives of “violations of the Securities Exchange Act of 1934” and is intended to represent “purchasers of DraftKings securities between December 23, 2019 and June 15, 2021.” The suit, Rodriguez v. DraftKings Inc. f/k/a Diamond Eagle Acquisition Corp., was filed in the Southern District of New York. It seeks damages for the “false and misleading statements” DraftKings made as it was preparing to go public.
Both lawsuits are going to be tough to support but should be relatively easy to defend unless there’s a smoking gun. Still, dealing with lawsuits and money grabs is always a headache for any company. Unfortunately, for many, it’s part of doing business. DraftKings hasn’t yet responded publicly to the suits.