Washington Redskins wide receiver Pierre Garcon filed a class-action lawsuit Friday against daily fantasy sports titan FanDuel, striking another blow to a nascent industry already reeling from the harsh reaction to its swift emergence.
Garcon sued FanDuel on behalf of all National Football League players for using his name and likeness in both advertisements and the contests it offers without compensation. FanDuel uses a handful of players’ names in its extensive advertisements and features pictures of players in the real-money fantasy sports games it hosts.
The lawsuit, which was filed in Maryland in federal court, adds to a litany of problems facing FanDuel and DraftKings, the other pillar of the burgeoning daily fantasy sports industry. Though DraftKings is not named in Garcon’s lawsuit, it faces a bevy of class-action suits brought by consumers over a scandal earlier this month over leaked information allegedly impacting the integrity of the contests.
“This is the latest chapter in an assault on these companies,” said McLean-based lawyer Seth Berenzweig, who specializes in sports and business. “This is a huge controversy. I think this is going to continue to turn this into a hornet’s nest.”
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Garcon’s suit presents another challenge for a nascent industry caught off guard by the response to its rapid growth. FanDuel started in 2008 and DraftKings followed three years later. The companies offer short-lived fantasy sports games in which consumers risk money on the collective statistics of individual athletes. They are considered legal because of a carve-out for fantasy sports in the Unlawful Internet Gambling Enforcement Act, enacted by Congress in 2006 to control the burgeoning on-line poker industry.
Daily fantasy’s popularity skyrocketed late last year, and a flood venture capital investment triggered an advertising blitz this fall as the new NFL season began. Sensing an opportunity for profit and fan engagement, professional leagues jumped aboard. Major League Baseball has equity stake in DraftKings, and the National Basketball Association owns part of FanDuel. Almost every major professional sports team has a sponsorship deal with one of the companies.
Along with rapid growth have come massive headaches. In September, Rep. Frank Pallone (D-NJ) requested a congressional hearing to examine whether the contests constitute gambling. The FBI launched a criminal probe into accusations that DraftKings and FanDuel employees won money by benefiting from private information shared between employees of the rival companies. States have held hearings and proposed legislation to label the contests gambling. Nevada recently joined five other states in outlawing the daily games.
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“They are being surrounded in every direction,” said lawyer Dan Wallach, a close observer of the industry. “The momentum has built. If you look back on the last month, this has been like a Black October for the entire industry. The news doesn’t get any worse. You get it from every angle, and it becomes catastrophic, the threat to the industry.”
The latest hit comes from Garcon’s lawsuit. In the complaint, Garcon’s lawyers argued that FanDuel is dependent on the notoriety of NFL players. The complaint alleges that FanDuel showed Garcon’s name 53 times during a 28-minute infomercial. The class-action suit does not name DraftKings because it owns a licensing agreement with the NFL Players Association, a point of contention.
“The entire business model is to exploit these players and do it without a license,” said Brian Murphy, a Columbus, Ohio-based lawyer representing Garcon. “Just because they’re public figures doesn’t mean they give up their rights to be used in a commercial manner. The right of players to exploit their notoriety and their brand is important. We don’t think anyone should be able to co-opt that without compensation.”
Murphy compared FanDuel’s use of NFL players’ names and likeness to the Madden video game franchise owned by EA Sports. Statistics are not copyrightable, which has protected season-long fantasy football web sites in past suits. But the distinct nature of daily fantasy combined with the bombardment of advertisements makes Garcon’s suit “the first of its kind,” Berenzweig said.
“We believe this suit is without merit,” FanDuel spokeswoman Justine Sacco said in a statement. “There is established law that fantasy operators may use player names and statistics for fantasy contests. FanDuel looks forward to continuing to operate our contests which sports fans everywhere have come to love.”
Berenzweig said the key for Garcon will be to prove FanDuel uses players’ names and likenesses more like a video game than a news article. “I think he potentially has a very strong case,” he said. “He raises a genuine issue whether FanDuel is violating his compensation rights.”
Garcon, 29, contends the protection for player names and statistics should not carry over to daily fantasy operators. “I think the real analysis will come down to whether there’s a legitimate need for first amendment protection,” Murphy said. “We don’t think there is. It’s nothing but a commercial enterprise.”
Garcon’s lawsuit is less of an existential threat to FanDuel than other problems it faces. Garcon is not questioning the fairness or legality of the game. But it could pose financial harm. Berenzsweig estimated the cost of a licensing deal to be in the millions of dollars.
“This isn’t just about the principle,” Murphy said. “It’s about just compensation. This isn’t a nuisance lawsuit. We’re going to want real and substantial compensation for Pierre and all the players.”
On its website, FanDuel says it has raised $363 million in funding. It expects to pay out $2 billion in prizes this year. In September alone, it spent $46.9 million on television advertising. It has become a massive figure in the sports industry in a short time span, and growing pains have been severe. The company’s CEO, Nigel Eccles, tried to temper them Thursday, calling for government regulation of daily fantasy in a letter on FanDuel’s web site.
On Friday, the news did not improve. For the remainder of the NFL season, FanDuel users will have the ability to scroll through their smartphones and add a player suing the maker of the game they are playing.
“This is a major development in a growing scandal,” Berenzweig said. “And it’s not a case that’s going to be going away anytime soon.”
Mike Jones contributed to this report.
