Fantasy sports fans jab Visa, MasterCard with RICO suit: Frankel


A newly filed class action claims that FanDuel and DraftKings could not have become billion-dollar businesses had it not been for the help of the credit card industry, which enabled players to enter online fantasy sports contests.

The suit, filed in Manhattan federal court on behalf of FanDuel and DraftKings players nationwide, accuses, Visa, MasterCard, American Express and other defendants of participating in a racketeering scheme to facilitate illegal gambling operations. (Disclosure: CNBC parent Comcast and NBC Sports are investors in FanDuel.)

In addition to DraftKings, FanDuel and the credit card companies, the class action names banks that issued credit cards used by the lead plaintiff, as well as the companies that processed the transactions.

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According to the complaint, the sports sites' co-defendants "knew or should have known" that DraftKings and FanDuel were online gambling sites under New York law. Nevertheless, the suit alleges, the banks, credit card companies and payment processors profited from the sites' operation by collecting transaction fees from players who used credit cards.

The class action demands restitution of all the money DraftKings and FanDuel players have lost as well as all fees paid to the credit card companies, banks and processors. Damages can be trebled under federal racketeering law.

DraftKings and FanDuel both require users to agree to arbitrate claims against the sites. It is not clear whether players will be able to evade those mandatory arbitration provisions in class actions against the site.

This suit is not the first time that the credit card industry has been dragged into the brouhaha over daily sports fantasy sites.

In a filing last week in New York State Supreme Court, DraftKings alleged that New York Attorney General Eric Schneiderman instructed the payment processors Vantiv and PayPal to stop accepting payments from the site's New York customers. DraftKings claimed Schneiderman threatened to take legal action against Vantiv and PayPal if they did not comply.

Vantiv is named as a defendant in the new class action, as is the processor PayPal is not named.

The suit is the first to bring claims against credit card companies and card issuers on behalf of FanDuel and DraftKings customers, according to plaintiffs' lawyer Hunter Shkolnik of Napoli Shkolnik.

"FanDuel and DraftKings would have been just a nice idea for these scammers if they didn't take credit cards," Shkolnik said.

A representative of DraftKings declined to comment, as did American Express and JPMorgan Chase, one of the banks named as a defendant.

A MasterCard spokesman said the company is reviewing the class action but, in general, works to ensure its cards are used only for legal transactions and consults with merchants' banks if questions arise. Representatives from FanDuel, Visa, Vantiv, Paysafecard and Capital One did not respond to requests for comment.