The Scottish play
FanDuel founders’ fight takes another turn
Eccles ups the legal ante in fight against FanDuel’s previous PE backers.
Five in hot water as UK election probe nears close.
Ahead of market opening, Brazil weighs ad ban.
Gibson vs. Betfair ruling provides welcome clarity for operators.
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FanDuel founders’ fight
Awa’ an bile yer heid: The original founders of FanDuel have upped the ante in their fight against the company and its PE backers, accusing them of producing an “invented counter-narrative” in a bid to have a high-stakes court case against them thrown out.
It is the latest strike in a legal battle that has dragged on since 2018.
FanDuel’s Scottish founders accused financial backers including KKR and Shamrock Capital of deliberately preventing them from cashing in when the business was sold to Paddy Power Betfair (now Flutter) earlier that year.
Iron bru: Led by Nigel Eccles, who served as FanDuel CEO until he was ousted in a boardroom coup in 2017, a group of 130 founders, startup investors and early employees – most of whom are based in Scotland – are going after the defendants for an as-yet undetermined sum.
Their case makes a series of claims alleging everything from breach of fiduciary duty to bribery and fraud.
The company and its financiers are vigorously defending what they term the founders’ “hollow” case.
Their motion to dismiss, filed in September, even wants the court to throw out part of the claim that the New York Court of Appeals has already held to be “sufficiently pleaded.”
The founders, whose response to the motion was filed last week, called the move “remarkable” and accused the KKR side of “treading old ground” while wanting the court to “second-guess its own prior ruling.”
Auld lang syne: It is yet another twist in a convoluted fight that began when the Eccles team lodged a $120m claim in the Court of Session – Scotland’s highest civil forum – in 2018.
That case, which was withdrawn without being heard the following year, alleged the defendants deliberately undervalued FanDuel during the Paddy Power Betfair talks in order to lock ordinary shareholders out of the deal.
The move was possible due to complex drag-along rights the founders agreed to when securing the KKR-Shamrock backing.
It’s up to you New York: The founders went on to try their hand in New York County Supreme Court in 2020, with Eccles by that point insisting New York law was applicable because the business, which was founded in Edinburgh in 2007, had moved its HQ from Scotland to the US in 2011.
Though KKR was not able to convince that court that the case should be governed by Scots rather than New York law, the founders’ claim still failed.
But, because the matter wasn’t dismissed in its entirety, KKR and Shamrock appealed, with the New York Appellate Division agreeing with them not only that Scots law should apply but that the Eccles case should be thrown out.
They’ll never take our freedom: Eccles duly took that decision to the New York Court of Appeals, which earlier this year unanimously found the lower court had been wrong to dismiss his claims but right to say they should be governed by Scots law.
At which point he performed a classic tech-bro pivot and filed a drastically extended case, all of which is relying on Scots, not New York, law.
The trouble with Scotland is that it’s full of Scots: The KKR side was livid, with its motion to dismiss, filed in September, accusing Eccles of being a “disastrous” leader who, having previously fought “tooth and nail” to avoid a hearing under Scots law, has no standing to invoke Scots law now.
They have until the middle of December to make their thoughts on Eccles’ latest filing known before the two sides face off in front of judge Andrea Masley at the beginning of next year.
Two dismissive: Should she rule in the founders’ favor and dismiss the motion to dismiss – which seems likely, at least in part, given the appeal court has already found the breach of fiduciary duty claim to be sufficiently pleaded – the case will proceed to a full hearing in 2027.
🚧 Until then, the barbarians will have to remain at the gate.
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Washington DC’s attorney general’s office is probing the District’s lottery and sports gambling contract, Axios DC reported. Attorney General Brian Schwalb’s office wants information related to the contract Intralot won in summer 2023.
It is unclear if the investigation concerns the operator’s poor performance or the awarding of the contract itself amid a broader bribery scandal unfolding over the District.
Spain’s Ministry of Consumer Affairs dished out close to €65.4m in fines for non-compliance with online gambling laws in the first half of the year, according to a government statement.
The ministry said 13 unlicensed operators had committed “very serious infringements.”
Each of the 13 were ordered to pay €5m fines.
Kaizen’s Betano has gained a license to operate in Colombia, the 16th operator to do so. The regulator Coljuegos said a 17th, Bingo Casino, would also gain a license within weeks.
BetBlocker has launched its software in the Maltese language through a partnership with EveryMatrix and the Responsible Gaming Foundation.
SkyCity Entertainment has appointed Elaine Campbell to chief legal, governance and external relations officer, a newly created position. She starts in March next year.
Compliance Assistant – Asia
Compliance Officer – São Paulo
AML Compliance Manager – Malta
UK election probe
Don’t keep it all inside: Five people, including a politician, are facing charges for using confidential information to bet on the date of the UK general election, Sky News first reported.
Protection racket: A source said between three and five individuals, including an elected official and a protection officer, are likely to be prosecuted for abusing their positions to wager on the correct date of the poll, which took place in July.
In June, Craig Williams, the former MP for Montgomeryshire and parliamentary private secretary to then prime minister Rishi Sunak, admitted he was under investigation by the UK Gambling Commission.
Williams had placed £100 ($126) on a July election at Ladbrokes in his constituency days before Sunak’s announcement.
Following his statement, the scandal grew and pulled in other individuals, including the then deputy prime minister Oliver Dowden, Sunak’s Downing Street chief of staff Liam Booth-Smith and a handful of Metropolitan Police officers.
The regulator is weighing whether the bets breached Section 42 of the Gambling Act 2005 (Cheating), while a separate police probe, later dropped, looked at misconduct in public office.
Poll dancing: While betting on the UK election is not new, broader demand exploded this year following unprecedented interest in the outcome of the US poll and the emergence of crypto prediction markets, said regulatory compliance expert Niall Guinness.
“The bookmaking industry is generally quite efficient, but offering markets which may be open to manipulation from those with inside information isn’t ideal,” he said.
“The solution, in my view, would be to put in a reasonable cut off date, well ahead of a potential announcement, to avoid anyone potentially ‘cheating’ at gambling,” Guinness said.
“This represents a unique case for the Gambling Commission, which clearly feels the evidence fulfills the burden of proof required to bring a prosecution.”
Potted history: Earlier this week, the regulator helped secure a five-year ban for British snooker player Mark King, who was accused of fixing and supplying inside information for betting purposes.
Brazil ad ban
And another thing: Brazil, weeks away from launching a regulated online market, is mulling a ban on all forms of betting advertising. The country’s consumer protection watchdog (Senacon) has called for an immediate embargo that would cull ads for betting bonuses and penalize marketing aimed at children.
Senacon has issued a preliminary order as part of attempts to rush through the ban.
The legal online market opens on January 1 and has been beset with controversy.
He who hesitates: Last month, President Luiz Inácio Lula da Silva said he “won’t hesitate” to shut the fledgling sports-betting sector down if problem gambler numbers rise.
Last week, the supreme court ruled that betting with social welfare checks is illegal.
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Gibson vs. Betfair
Unknown unknowns: The High Court of England and Wales handed Betfair a significant victory when it dismissed a customer’s claims that the company had taken advantage of his problem gambling and claimed £1.5m of losses should be returned.
The plaintiff Lee Gibson said Betfair should have known he had issues with gambling despite his successful efforts to cover up his problems.
Gibson claimed Betfair – owned by Flutter Entertainment – had breached the terms of its gambling license by allowing him to place bets on the exchange.
His Honour Judge Bird rejected each of the claimant’s claims, finding there had been no breach of the LCCP. In his judgment, he said Betfair “neither knew or ought to have known” he was a problem gambler.
He added that the claim for breach of statutory duty had been rightly abandoned at trial and that there was no relevant contractual or tortious duty owed to the claimant.
The judge also held that he would have rejected the claimant’s damages claims on the grounds of causation in any event.
Your laws do not apply to me: The lawyers at Wiggin noted the judgment confirms the case law from the Calvert case brought against William Hill in 2008 that a person does not owe a common law duty of care to prevent others suffering harm from their own actions.
The team added that the judgment “upholds a clear distinction” between the applicable regulatory and contractual regimes.
That’s how the cookie crumbles: They suggested the decision would be welcomed by operators as bringing clarity and further certainty to the law and the legal framework governing B2C contracts in this heavily regulated space.
Wiggin said operators have been in regular receipt of “cookie-cutter claims from opportunistic consumers” represented by a small number of law firms.
They had been waiting for a case that confirmed the decision laid down in Calvert.
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