Last December, the District Court for the Southern District of Indiana certified a class of Indiana residents who placed winning bets with DraftKings, Inc. (DraftKings) on an NBA game between the Los Angeles Lakers and the Denver Nuggets. The day after the game, DraftKings canceled the bet. Matthew McAfee is the named plaintiff in the class action alleging breach of contract and violations of Indiana’s Deceptive Consumer Sales Act, the latter of which was dismissed before the class was certified.
Mr. McAfee placed a “seven-leg, same-game parlay” bet, which means that seven things had to happen in the same game for Mr. McAfee to win. He bet $100, and the bet should have paid $150,000 when all seven things occurred, which they did. However, already, during the game, DraftKings notified its customers that settlement of the bet would be delayed
When Mr. McAfee set up his account with DraftKings, he agreed to be bound, under its Terms and Conditions by certain House Rules. House General Rule 5.4 provides,
DraftKings reserves the right, at its own discretion, to declare a bet void, totally or partly, irrespective if the bet is settled, if it is obvious that . . . [b]ets have been offered, placed and/or accepted due to an Error.”
So it goes.
In McAfee v. DraftKings, Inc., the District Court ruled on cross-motions for summary judgment. Notwithstanding Mr. McAfee’s breach of contract claim, he conceded that, under the House Rules to which he agreed, DraftKings could cancel a bet for obvious errors at any time and that obvious errors had occurred. In this case, each leg required a player to score more than a threshold set significantly below both the market and the players’ usual averages. Nonetheless, he argued that DraftKings violated an Indiana law, which he argued was impliedly part of the contract, by waiting until the day after the game to cancel the bet. The statute, Mr. McAfee contended, required that the bet be canceled before the end of the contest. Here’s the statutory text:
A certificate holder or vendor may not cancel a wager that has been accepted, except in the event of obvious error, at the certificate holder’s or vendor’s discretion. A certificate holder must pay winning patrons following the end of the sporting event.
Ind. Code § 4-38-5-6.
The Court assumed without deciding that the statute was part of the contract. Still, it found in this language no requirement that cancellation must occur before the end of the contest. Rather, it focused on the language in the statute granting the vendor discretion. The statute seems to say nothing more than that a vendor must pay at some point after the event ends unless it determines, in its discretion, that an obvious error has occurred. In this case, the statute’s language about paying “winning patrons” did not apply. Mr. McAfee was never a winning patron, because the bet was cancelled rather than settled. DraftKings provided notice that settlement of the bet would be delayed, so Mr. McAfee was under no misapprehension of his status.
The Court denied Mr. McAfee’s motion for summary judgment and granted DraftKings’ motion.