Daily fantasy sports operator sued by U.S. hockey club

In a sports sponsorship deal that has turned sour, the Minnesota Wild hockey club (an NHL member) has sued Emil Interactive Games – parent group of daily fantasy sports provider DraftOps – for breaching a sponsorship agreement by not paying the club $1.1 million in respect of payments due from November last year to June this year.

The non-payment – Emil Interactive does not dispute that an agreement was signed – is bad enough, but the DFS company’s attempt to dismiss the case has exacerbated the issue, and does little to enhance the industry’s reputation.

The publication Legal Sports Report has published details of the DFS response to the litigation in which Emil Interactive seeks to void its obligations under the contract by invoking a clause within it which it claims gives it “…the right to terminate the sponsorship upon written notice in the event that either the NHL and/or the State of Minnesota rule that Sponsor’s primary business activities are illegal or prevented by Rule or Law.”

The DFS operator’s claim that DFS is illegal in Minnesota and it can therefore void its obligations by calling for the hockey club’s claim to be dismissed is startling and not entirely correct; it is based on the precept that because Minnesota has not specifically legalised daily fantasy sports the genre must therefore be unlawful….here’s what Emil’s legal team is claiming:

“As a result of Minnesota’s failure to legalize online DFS as described in detail infra, the subject Sponsorship Agreement is rendered void and unenforceable. Consequently, compelling the Parties to enforce the terms of the Agreement, would be a potential violation of the Unlawful Internet Gambling Enforcement Act, (UIGEA), and the Illegal Gambling Business Act of 1970 (IGBA), also detailed infra subjecting all parties herein to criminal liability both on Federal and State levels. “

It is true that a bill to legalise DFS in Minnesota received strong support in the state House last (May) month – see previous reports – but ran into trouble in the Senate Tax Committee and stalled there….but it was not rejected outright.

And DraftOps claims that it does not accept paid activity from Minnesota DFS fans, begging the question why it entered into a sponsorship agreement with a Minnesota club.

The outcome of this case will be watched with interest by operators, sports teams and national sports leagues.