The lawsuit which could – but probably won’t – make fantasy sports more expensive

The cost of operating fantasy sports games could be about to get a lot more expensive if a lawsuit is successful.

(Photo credit: Keith Allison)

A lawsuit brought by three former NCAA football players against fantasy sports games giants DraftKings and FanDuel appears headed nowhere in an appeal, but the possibilities if it is successful are intriguing.

The question, currently before the Indiana Supreme Court, is whether the use of athletes’ likenesses and names without compensation for the athletes is illegal in the lawsuit Daniels et al v. FanDuel, Inc. et al.

History of Daniels v. FanDuel

In May 2016, former Northern Illinois football players Akeem Daniels and Cameron Stingily were joined by former Indiana University football player Nicholas Stoner in filing the lawsuit against DraftKings and FanDuel in Indiana’s southern district.

The three sought $5 million in damages based on the argument that both companies had used their likenesses and names in fantasy games in violation of state law which gave them the right to control how those elements of their individual identities are used.

In September 2017, the district court granted a motion by FanDuel to dismiss the case. The defendants argued that the plaintiffs failed to substantiate how the use of their likenesses and names caused real harm to them, and the court agreed.

A door was left open for the plaintiffs in the dismissal order, however. The defendants also argued that their use of player likenesses and names were protected by the First Amendment to the Constitution of the United States of America. The court said that was not a valid argument at that stage of the trial.

That was the grounds upon which the plaintiffs appealed the dismissal to the Indiana 7th Circuit, which has petitioned the state Supreme Court for a clarification on whether the First Amendment protects such usage as DraftKings and FanDuel argued.

While it seems there is sufficient precedent to motivate the court to answer that question in the affirmative, the hypothetical situations which could arise from a departure from that precedent are intriguing.

If it all comes crashing down

Hypothetically assuming that the court rules the First Amendment does not protect the usage of players’ likenesses and names, and that ruling holds up on appeals, there would be new legal hoops for the companies to jump through in order to stay in compliance with the new status quo.

In terms of games offered that are based upon real college football and men’s basketball contests, this would be a moot point. Both companies suspended those games in March 2016. The remaining games that the sites, and others like them, still offer would be affected as well, however.

What the game operators would likely have to do is purchase licenses from not only the various professional leagues whose contests they offer games based on, but the various player associations as well. DraftKings and FanDuel already have partnerships or have sold stakes to several such organizations, like MLB and the NHL. Getting licenses from the various PAs should not prove difficult, although it would be an added expense.

That added expense could prove a new barrier to entry for smaller operators, further monopolizing the industry for DraftKings and FanDuel. With a higher overhead and fewer competitors, it’s likely that some of that cost would be passed on to those paying for entries into games.

While it’s likely that this hypothetical situation will never come to pass and would represent nothing but a speed bump for DraftKings and FanDuel, it could also mean that the cost of buying an entry for the average fantasy sports player could increase.

Will you continue playing fantasy games if the cost goes up? Let us know what you think in the comments.

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