Underdog Fantasy Takes Legal Action Against California AG Over DFS Judgment
The saga is just beginning: we've already reported that the California AG is set to release its opinion on DFS in the state, which may make it illegal - and now, we've just learned that Underdog has sued the Attorney General in order to stop the AG from releasing its opinion on Daily Fantasy Sports.
Daily fantasy sports operator Underdog has filed an emergency lawsuit to stop California Attorney General Rob Bonta from issuing a legal opinion that could significantly impact the fantasy sports market in the state.
Filed Monday in the Sacramento Superior Court, the lawsuit argues that the attorney general lacks the legal authority to issue such an opinion and warns that doing so could cause 'irreparable harm' to the company. The anticipated opinion is expected to declare daily fantasy sports illegal under California law - a move that Underdog says would not only destroy its own operations but also upend an industry that has operated in the state for decades.
Underdog warns of 'imminent irreparable harm'
In a memorandum supporting its request for a temporary restraining order or TRO, Underdog said it was blindsided by the impending release of Bonta's opinion. The company notes that approximately 10% of its overall business is tied to California customers.
"Without this Court's immediate intervention, this unlawful gambit may succeed," the memorandum states. "Underdog faces imminent irreparable harm - from fleeing customers, risk-averse banks and payment processors, and the loss of investment and goodwill - if the Attorney General issues the opinion as planned."
The company is seeking the TRO to preserve what it describes as the long-standing status quo for DFS in California, pending further court review.
Challenging the Attorney General's authority
At the heart of the lawsuit is Underdog's contention that the attorney general has no authority to weigh in on the legality of DFS through this type of opinion. The company asserts that such legal opinions are limited to questions of law directly tied to the responsibilities of the officials requesting them.
"Absent relief from this Court, Attorney General Rob Bonta will issue an opinion later this week that will decimate fantasy sports in California," the filing reads. "Attorney General Bonta should be enjoined from doing so, not because he is wrong in his views on the legality of fantasy sports - though he certainly is - but because...he lacks authority to issue the opinion."
Underdog contends that neither of the statutory requirements are satisfied in this case, and therefore the AG's office is overstepping its bounds.
Pressure campaign alleged
In a supporting declaration, Underdog attorney David Gringer of Wilmer Cutler Pickering Hale and Dorr LLP claimed that the AG's office is using the forthcoming opinion to apply pressure on DFS companies to exit the state voluntarily. According to Gringer, a representative of the AG's office indicated that the goal was to follow the playbook of Texas Attorney General Ken Paxton, whose 2016 opinion led one major DFS company to cease operations in that state.
"The representative stated that...the goal of the Attorney General's office would be to use the threat of an enforcement action... to pressure Underdog into agreeing to leave California entirely," Gringer's declaration reads.
Citing California's legal guidelines
Gringer also questioned the internal guidelines used by the AG's office in deciding when to issue opinions. According to state law (Section 12519), the attorney general may only issue formal legal opinions at the request of certain state officials - and only when the questions pertain to the duties of their respective offices.
When asked about these limits, the AG's office reportedly claimed that it was obligated to answer all questions posed by legislators, regardless of context. But Gringer pushed back, including a reference to the AG office's own published guidelines that contradict such an interpretation.
The attorney general's office has not publicly responded to the lawsuit, but a formal legal opinion is still expected by the end of the week. If issued, the opinion could lead to widespread disruption in California's thriving DFS sector.
