DraftKings bites back in SBTech report class action lawsuit

DraftKings has angrily rebuked claims made as part of class action lawsuit that it misled investors over the alleged black-market activity of its SBTech subsidiary in the run up to its SPAC reverse merger.

Filing a motion with the US District Court for the Southern District of New York, the sportsbook operator took aim at “biased” claims made in a report into SBTech’s business by New York-based analysis firm Hindenburg Research.

The report suggested investors should offload DraftKings stock due to the alleged black-market activity of SBTech, with disgruntled DraftKings investors later launching a class action lawsuit against DraftKings over the claims made.

SBTech is the operator’s proprietary sports betting technology business acquired as part of a $3.3bn combination to take the company public in April 2020.

DraftKings refuted claims that it did not warn investors over SBTech’s activities, suggesting it had provided warnings over several pages that the business was subject to “a variety of US and foreign laws, many of which are unsettled and still developing, and which could subject [DraftKings] to claims or otherwise harm our business.”

In the motion, DraftKings suggested the class action suit lacks the “detailed and particularized” facts of the case as required under the Private Securities Litigation Reform Act (PSLRA).

Instead, it suggests the class action suit “repackages and regurgitates” claims made in the Hindenburg report, despite Hindenburg admitting these claims could be considered biased based on their status as a short-seller of DraftKings stock.

“Plaintiff admittedly did nothing to verify those allegations, and offers nothing else in support of his claims,” DraftKings’ memorandum states.

Citing an unevidenced basis for the suit, DraftKings’ response claims plaintiffs “mischaracterize” the scope of the complaint, suggesting that any obligation of DraftKings to comment on SBTech’s conduct was “illegal and contrary to well-settled law.”

Specific counterclaims made by DraftKings include that the suit does not conform to the PSLRA and those arguments raised come “nowhere close” to proving any culpability on DraftKings’ part.

DraftKings suggests “hopelessly flawed” accusations of SBTech’s illegal activity made as part of the class action suit were meritless in nature, attacking the fraud allegations made.

As such, DraftKings has filed for a full dismissal of the case “with prejudice”, something which could potentially open the door to the payment of damages and legal costs.

DraftKings and its executives are currently the subject of a number of lawsuits relating to the Hindenburg report and allegations of fraud and violations of US securities law.

The operator is also the subject of an investigation by the Securities and Exchange Commission.

The case continues.